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From: jmsellens@watmath.UUCP (John M Sellens)
Newsgroups: net.invest,net.taxes
Subject: Re: ZERO Coupon Certificates
Message-ID: <13938@watmath.UUCP>
Date: Fri, 12-Apr-85 20:08:17 EST
Article-I.D.: watmath.13938
Posted: Fri Apr 12 20:08:17 1985
Date-Received: Sat, 13-Apr-85 03:16:47 EST
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Xref: watmath net.invest:594 net.taxes:804

One minor addition to Jeff Sonntag's explanation of how to figure the
implicit interest rate on a zero coupon bond.

If you change the definition of N to be "number of compounding periods to
maturity" and the definition of i to be "interest rate per compounding
period".  It makes it easier to compare to other instruments, because
most/many rates are quoted as semi-annual compounding.

To figure the equivalent semi-annual compounding rate on say, the 7 year
bond, set N=14, solve for i, then double i to get the nominal annual rate.

John Sellens