Calculating zero coupon rate involves finding the discount rate that equates the present value of future cash flows to the current price of a bond. For example, a zero-coupon bond with a face value of $1,000 and a maturity of 10 years would require a zero coupon rate of around 4.65% to sell at a current price of $631.94.
Zero coupon rates are important in fixed income markets and are used to value bonds, calculate yields, and assess credit risk. They have also played a role in the development of other financial instruments, such as zero-coupon swaps and options.