At Par

At par is the financial term which describes the price level of the bond.  The bond which is sold at par is generally sold for its face or par value.  The bond pricing provides details about shareholders expectations of the market interest rates. The bonds sell at par, at a discount and at a premium, disclose the market’s predictions of the interest rates. The issuing company pays the holder a certain fixed amount of interest every period all over the life of the bond. After the maturity or end of the life of the bond, the bond holder would get an amount mentioned in the bond; this is generally 1,000 dollars (USD) for the bonds distributed in the US. Bonds are usually issued by governments and corporations. The value of the bond depends on the reliability or credibility of the agency which issued it. The face value of the bond is the amount paid at the end of the life of the bond, which is also known as par value of a bond.  If the holder receives interest payments then it is called as bond coupons and it is generally described by the interest rate which they represent.

For instance, the bond might have seven percent coupon.  If it is a 1000 dollars bond with the semiannual coupons, then the bond holder would get 350 dollars or 3.5 percent coupon, every six months. The value of the bond is the present rate of the payment stream which the bond promises, with changes for the non-payment problems and other issues. The bonds are classified into classes depending on their price levels.  The bond valued above its face sells at a premium, which is called as a premium bond.  If the bond is sold lower than its face value then it is known as discount bond. 

Questionnaire:

• What is at par?
• What is a bond?