A zero-coupon bond pays nothing until maturity — its entire return comes from the discount between today’s price and the face value received at the end.
How it works
The price is simply the face value discounted back to today at the given yield, over the number of years to maturity — a single present-value calculation, with no coupon payments to add in along the way.
What this does not include
Real zero-coupon bond prices also reflect credit risk and market liquidity beyond the pure time-value-of-money calculation shown here — this is the theoretical price at a given yield, not a live market quote.
How to use this calculator
- Enter face value, yield to maturity, and years to maturity.
Frequently asked questions
Why is a zero-coupon bond’s price so sensitive to interest rate changes?
Because all of its value comes from a single payment far in the future — there are no earlier coupon payments to soften the effect of a rate change, giving it a longer effective duration than a coupon bond of the same maturity.
Is buying at a discount the same as earning interest?
Economically, yes — the IRS treats the implied annual accretion of a zero-coupon bond as taxable interest income each year, even though no cash is received until maturity (for a taxable zero-coupon bond).
What’s the difference between this and a Treasury bill?
Mechanically similar (both are pure discount instruments), but this calculator handles any maturity length using standard annual compounding, while the T-bill calculator uses the specific short-term Treasury quoting conventions.
