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Coupon Equivalent Rate - CER
What does it mean?
A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities.
In Other Words...
Because the quoted rate of bonds is calculated according to face value, this rate for bonds issued at a discount is inaccurate for comparing them to other coupon bonds. It is more accurate to use the coupon equivalent rate because it uses the investor's initial investment as the basis:
Coupon Equivalent Rate = [(Market Price - Face value) / (Market Price)] * (360/Days until maturity)
Related Links
Bond Basics Tutorial - What are bonds and do they belong in your portfolio? Get all the answers in this comprehensive tutorial.
Related Terms
Coupon | Coupon Equivalent Yield | Discount | Face Value | Fixed Income Security | Market Value | Zero-Coupon Bond
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A | B |
C | D |
E | F |
G | H |
I | J |
K | L |
M | N |
O | P |
Q | R |
S | T |
U | V |
W | X |
Y | Z
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