Zero-Coupon Bond Calculator

A zero-coupon bond is a debt security that does not pay periodic interest. Instead, it is sold at a discount to its face value and matures at par. The investor's return is the difference between the discounted purchase price and the full face value received at maturity.

For example, a $10,000 face value bond with a 5% discount rate and 10 years to maturity would cost about $6,139 today. After 10 years, the investor receives the full $10,000, earning $3,861 in implied interest over the term.

How the formula works

The purchase price is the present value of the face value: PV = FV / (1 + r)^t, where FV is the face value, r is the annual discount rate (yield to maturity), and t is the number of years to maturity. The chart shows how the bond's value appreciates from the purchase price to the face value over the holding period.

Common use cases

Zero-coupon bonds are used for long-term savings goals like education or retirement, where the investor wants a known future amount without reinvestment risk. They are also issued by governments (U.S. Treasury STRIPS), municipalities, and corporations. This calculator is a planning estimate for understanding bond pricing mechanics and is not investment advice.