Bond price is a present value of its cash flow. A payment made by a bond at time t has its own discount rate given by t year zero rate. Hence, the price of a bond paying a cash flow CF1, C F2, ..., CFn is given by n CF;e-Riti i=1 Example. Consider semiannual two year coupon paying bond with annual coupon rate of 10% and par value of $1,000. Let us find the price of this bond by using zero rates from the table below: Maturity (year) Annual zero rate, % 0.5 5.0 1.0 5.8 1.5 6.4 2.0 6.8