Compound Accreted Value - CAV

Look in a box of stuff from your childhood. It’s possible you might find a $50 U.S. Treasury Bond that you received from a grandparent back in the day. While the bond might say $50 on it…that's the value when it matures.

Let’s say that the bond will be worth $50 in 2025. How do you determine the value of that piece of paper right now?

That's where Compound Accreted Value comes in. This is the theoretical value of a zero-coupon bond (and other long-term investments that don’t pay interest or coupons). Basically, you’ll just take the original amount of money that the buyer paid for the bond and calculate the compound interest over time.