DEFINITION of 'Compound Accreted Value  CAV'
A measure of the theoretical value of a zerocoupon bond at any given point in time. Because there are no interest payments like there are with traditional bonds, the interest of a zerocoupon bond accrues until maturity. Therefore, the CAV can be calculated by adding all of the interest earned up to a given point in time to the original price.
BREAKING DOWN 'Compound Accreted Value  CAV'
Calculating a zerocoupon bond's CAV becomes important if the bond carries a call provision. This is because call provisions for zerocoupon bonds are typically linked to the bond's CAV. The provision will usually stipulate that the issuer can call the bond on a specific date at a price that is a premium to the bond's CAV.
A zerocoupon bond is trading at a premium if it costs more than its CAV at that specific point in time. Conversely, the zerocoupon bond is trading at a discount if it costs less than its CAV.

ZeroCoupon Convertible
A fixed income instrument that is a combination of a zerocoupon ... 
Coupon Stripping
The separation of a bond's periodic interest payments from its ... 
Accreted Value
The value, at any given time, of a multiyear instrument that ... 
Discount Bond
A bond that is issued for less than its par (or face) value, ... 
Deferred Interest Bond
A debt instrument that pays interest only upon maturity. Unlike ... 
Bond
A debt investment in which an investor loans money to an entity ...

Investing
All About Zero Coupon Bonds
Zerocoupon bonds are bonds that do not make any interest payments (which investment professionals often refer to as the "coupon") until maturity. For investors, this means that if you make an ... 
Investing
ZeroCoupon Bond
A zerocoupon bond or ‘no coupon’ bond is one that does not disburse regular interest payments. Instead, the investor buys the bond at a steep discount price; that is, at a price ... 
Investing
How Are ZeroCoupon Municipal Bonds Taxed?
What every investor needs to know about taxes and zerocoupon muni bonds. 
Investing
Explaining Original Issue Discount
An original issue discount is the amount below par at which a bond or other debt instrument is issued. 
Investing
How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?
Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity. 
Investing
How To Evaluate Bond Performance
Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk. 
Investing
Corporate Bonds: Advantages and Disadvantages
Corporate bonds can provide compelling returns, even in lowyield environments. But they are not without risk. 
Investing
A Guide to High Yield Corporate Bonds
The universe of corporate high yield bonds encompasses multiple different types and structures. 
Investing
Corporate Bond Basics: Learn to Invest
Understand the basics of corporate bonds to increase your chances of positive returns. 
Financial Advisor
Advising FAs: Explaining Bonds to a Client
Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...

How does an investor make money on a zero coupon bond?
Learn about investing in zerocoupon bonds, exactly how they work as an investment vehicle, and their advantages and disadvantages ... Read Answer >> 
What is the difference between a zerocoupon bond and a regular bond?
The difference between a zerocoupon bond and a regular bond is that a zerocoupon bond does not pay coupons, or interest ... Read Answer >> 
How do I calculate the holding period return yield on a zerocoupon bond?
Learn how to calculate the holding period return yield for a zerocoupon bond based on a formula with a relevant example ... Read Answer >> 
Why do interest rates tend to have an inverse relationship with bond prices?
At first glance, the inverse relationship between interest rates and bond prices seems somewhat illogical, but upon closer ... Read Answer >> 
What is the formula for calculating the capital to risk weight assets ratio for a ...
Learn about the Macaulay duration and zerocoupon bonds, the formula used for the calculation and how to calculate the Macaulay ... Read Answer >> 
What are the different types of college savings accounts?
Find out more about the Macaulay duration and zerocoupon bonds and how to calculate the Macaulay duration of a zerocoupon ... Read Answer >>