Coupon Equivalent Rate - CER

Filed Under » Acronyms , Bonds , Fixed Income

	Definition of 'Coupon Equivalent Rate - CER' A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities. Formula:
	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.

Related Definitions

Coupon

The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. This is also referred to as the "coupon rate" or "coupon percent rate".
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Coupon Equivalent Yield - CEY

A method of calculation used to calculate the yield on bonds with maturities of less than one year and which normally sell at a discount and do not pay coupons.Formula
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Discount

The condition of the price of a bond that is lower than par. The discount equals the difference between the price paid for a security and the security's par value.
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- Face Value
  
  The nominal value or dollar value of a security stated by the issuer. For stocks, it is the original cost of the stock shown on the certificate. For bonds, it is the amount paid to the ...
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- Fixed-Income Security
  
  An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. Unlike a variable-income security, where payments change ...
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- Market Value
  
  1. The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as "market price".2. The market capitalization plus the market ...
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- Zero-Coupon Bond
  
  A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. Also known as an ...
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