Coupon Equivalent Rate - CER

AAA

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.

RELATED TERMS
  1. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Face Value

    The nominal value or dollar value of a security stated by the ...
  3. Coupon Equivalent Yield - CEY

    A method of calculation used to calculate the yield on bonds ...
  4. Zero-Coupon Bond

    A debt security that doesn't pay interest (a coupon) but is traded ...
  5. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  6. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic ...
Related Articles
  1. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  2. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  3. Bonds & Fixed Income

    How does face value differ from the price of a bond?

    Discover how bonds are traded as investment securities and understand the various terms used in bond trading, including par value, market price and yield.
  4. Bonds & Fixed Income

    Why is my bond worth less than face value?

    Find out how bonds can be issued or traded for less than their listed face values, and learn what causes bond prices to fluctuate in the secondary market.
  5. Trading Strategies

    How long will it take for a savings bond to reach its face value?

    Learn essential information about U.S. savings bonds along with an explanation of the unique characteristics of this popular investment instrument.
  6. Bonds & Fixed Income

    When are treasury bills best to use in a portfolio?

    Understand the role that U.S. Treasury bills can play in an investment portfolio and why they represent one of the most liquid and secure debt obligations.
  7. Trading Strategies

    What is considered a good interest rate for a certificate of deposit (CD)?

    Explore the various options available with certificates of deposit and discover how to find the most lucrative rates for CD investors.
  8. Retirement

    What are the typical durations for a certificate of deposit?

    Investing in a certificate of deposit offers individuals the ability to earn interest on idle funds with less risk than stock or bond investments.
  9. Investing Basics

    What is the effect of price inelasticity on demand?

    Find out why price inelasticity of demand shows the relationship between demand and price if the price of an inelastic good is either lowered or raised.
  10. Bonds & Fixed Income

    What is the lowest capitalization rate before an investment becomes unprofitable?

    Learn about different levels of profitability associated with investments featuring similar capitalization rates. Explore how value changes affect rates.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center