# Implied Rate

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## Definition of 'Implied Rate'

The implied rate is a forward-looking estimate of the interest rate that will be used to discount future cash flows. It is calculated by taking the difference between the current price of a bond and its par value, and then dividing that difference by the bond's yield to maturity.

The implied rate is used by investors to compare the relative value of different bonds. It can also be used to estimate the future value of an investment.

The implied rate is not the same as the current yield on a bond. The current yield is the interest rate that is actually being paid on a bond. The implied rate is an estimate of the interest rate that will be paid in the future.

The implied rate is calculated using the following formula:

```

Implied Rate = (Current Price - Par Value) / Yield to Maturity

```

where:

* Current Price is the current market price of the bond.

* Par Value is the face value of the bond.

* Yield to Maturity is the interest rate that is used to discount the bond's future cash flows.

The implied rate is a useful tool for investors because it can help them to compare the relative value of different bonds. It can also be used to estimate the future value of an investment.

However, it is important to note that the implied rate is only an estimate. The actual interest rate that will be paid in the future may be different from the implied rate.

The implied rate is used by investors to compare the relative value of different bonds. It can also be used to estimate the future value of an investment.

The implied rate is not the same as the current yield on a bond. The current yield is the interest rate that is actually being paid on a bond. The implied rate is an estimate of the interest rate that will be paid in the future.

The implied rate is calculated using the following formula:

```

Implied Rate = (Current Price - Par Value) / Yield to Maturity

```

where:

* Current Price is the current market price of the bond.

* Par Value is the face value of the bond.

* Yield to Maturity is the interest rate that is used to discount the bond's future cash flows.

The implied rate is a useful tool for investors because it can help them to compare the relative value of different bonds. It can also be used to estimate the future value of an investment.

However, it is important to note that the implied rate is only an estimate. The actual interest rate that will be paid in the future may be different from the implied rate.

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Copyright © 2004-2023, MyPivots. All rights reserved.