Coupon Equivalent Rate - CER

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

BREAKING DOWN '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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