Zero-coupon bonds with a maturity matching every payment date ought to be used. A bond may be a certificate of indebtedness that gives a gradual financial gain stream to the capitalist within the kind of coupon payments.
To calculate the worth of a bond, add this price of the interest payments and this price of the principal you receive at maturity. To calculate this price of your interest payments, you calculate the worth of a series of equal payments every over time.
The only money payments the capitalist can receive from a zero-coupon bond area unit the interest payments that area unit paid up till the day of the month.
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