Coupon Equivalent Rate - CER
A alternative calculation of coupon rate used to compare zero-coupon and coupon fixed-income securities.
Formula:
Investopedia Commentary
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 Links
Bond Basics Tutorial
Advanced Bond Concepts
See also: Coupon, Coupon Equivalent Yield, Discount, Face Value, Fixed-Income Security, Market Value, Zero-Coupon Bond
Also spelled: CER