Coupon equivalent yield

Coupon equivalent yield

True interest cost expressed on the basis of a 365-day year.

Coupon Equivalent Rate

An alternative method of calculating the yield on a bond. It is used for zero-coupon bonds, as these are issued at discounts to their face value; that is, the CER states what the coupon rate would be if it carried a coupon and had been sold at face value. As such, it gives a more accurate picture of the yield of a zero-coupon bond. It is calculated as:

CER = ((Market Price - Face Value) / Market Price) * (365 / Days until Maturity).
References in periodicals archive ?
For example, if the interest was $500 and the amount paid was $9,500, then the coupon equivalent yield would be 5.