Coupon Equivalent Rate (CER)
A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities.
Formula:
Investopedia Says:
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:
Coupon
Coupon Equivalent Yield
Discount
Face Value
Fixed-Income Security
Market Value
Zero-Coupon Bond |