Coupon Equivalent Rate - CER

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DEFINITION of 'Coupon Equivalent Rate - CER'

A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities.

Formula:

Coupon Equivalent Rate - CER

INVESTOPEDIA EXPLAINS'Coupon Equivalent Rate - CER'

Because the quoted rate of bonds is calculated according to face value, this rate for bonds issued at a discount is inaccurate for comparing them to other coupon bonds. It is more accurate to use the CER because it uses the investor's initial investment as the basis.

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RELATED FAQS
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    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
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    The bond market is highly sensitive to changes in the federal funds rate. When the Federal Reserve increases the federal ... Read Full Answer >>
  3. How do I use the holding period return yield to evaluate my bond portfolio?

    The holding period return yield formula can be used to compare the yields of different bonds in your portfolio over a given ... Read Full Answer >>
  4. What is the relationship between current yield and yield to maturity (YTM)?

    Both the current yield and yield to maturity (YTM) formulas are methods of calculating the yield of a bond. However, these ... Read Full Answer >>
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