At Par

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DEFINITION of 'At Par'

A term that refers to a bond, preferred stock or other debt obligation that is trading at its face value. The term "at par" is most commonly used with bonds.

A bond that trades at par will have a yield equal to its coupon, and investors will expect a return equal to the coupon for the risk of lending to the bond issuer. Bonds are quoted at 100 when trading at par.

BREAKING DOWN 'At Par'

Due to ever-changing interest rates, financial instruments almost never trade exactly at par. A bond will likely not trade at par when interest rates are above or below its coupon rate.

For example, if a company issues a bond with a 5 % coupon and interest rates increase to 10%, investors will pay less than par for the bond to compensate them for the difference in rates. In the same vein, if interest rates drop, investors will be willing to pay more than par for the bond.

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RELATED FAQS
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    People often get confused when they read about the "par value" for a stock. One reason for this is that the term has slightly ... Read Full Answer >>
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    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
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