Average Price

What is an 'Average Price'

An average price is a representative measure of a range of prices that is calculated by taking the sum of the values and dividing it by the number of prices being examined. The average price reduces the range into a single value, which can then be compared to any point to determine if the value is higher or lower than what would be expected.

2. A bond's average price is calculated by adding its face value to the price paid for it and dividing the sum by two. The average price is sometimes used in determining a bond's yield to maturity where the average price replaces the purchase price in the yield to maturity calculation.

BREAKING DOWN 'Average Price'

1. In situations where there is a range of prices it can be useful to calculate the average price to simplify a range of numbers into a single value. For example, if over a four-month period you paid $104, $105, $110, and $115 for your utilities, the average price or cost of your monthly utilities would be $108.50.

2. Although the average price of a bond is not the most accurate method to find its YTM, it does give investors a rough and simple gauge to find out what a bond is worth.

RELATED TERMS
  1. Average Return

    The simple mathematical average of a series of returns generated ...
  2. Bond Yield

    The amount of return an investor will realize on a bond. Several ...
  3. Average Effective Maturity

    For a single bond, it is a measure of maturity that takes into ...
  4. Current Yield

    Annual income (interest or dividends) divided by the current ...
  5. Linearly Weighted Moving Average

    A type of moving average that assigns a higher weighting to recent ...
  6. Running Yield

    The annual income on an investment divided by its current market ...
Related Articles
  1. Markets

    Bond Yields: Current Yield And YTM

    A bond's current yield, also called "bond yield," is the interest it pays annually divided by the bond's price. A stock's current yield, also called "dividend yield," is the sum of its annual ...
  2. Trading

    Moving Averages: Factors To Consider

    By Casey Murphy, Senior Analyst ChartAdvisor.com Data Used in Calculation Most moving averages take the closing prices of a given asset and factor them into the calculation. We thought it would ...
  3. Markets

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  4. Managing Wealth

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
  5. Markets

    Calculating Bond Equivalent Yield

    The bond equivalent yield calculates the semi-annual, quarterly or monthly yield on a discount bond or note.
  6. Managing Wealth

    How Bond Prices and Yields Work

    Understanding bond prices and yields can help any investor in any market.
  7. Markets

    Understanding Face Value

    Face value is the dollar value stated on a security.
  8. Markets

    How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?

    Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity.
  9. Markets

    Understanding the Different Types of Bond Yields

    Any investor, private or institutional, should be aware of the diverse types and calculations of bond yields before an actual investment.
  10. Managing Wealth

    Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.
RELATED FAQS
  1. Can a bond have a negative yield?

    The return a bond provides to an investor is measured by its yield, which is quoted as a percentage. Current yield is a commonly ... Read Answer >>
  2. What is the relationship between current yield and yield to maturity (YTM)?

    Learn about the relationship between a bond's current yield and its yield to maturity, including how the market price of ... Read Answer >>
  3. I keep hearing about the 50-day, 100-day and 200-day moving averages. What do they ...

    Whether you are using the 50-day, 100-day or 200-day moving average, the method of calculation and the manner in which the ... Read Answer >>
  4. What is the difference between yield to maturity and the spot rate?

    Find out how yield to maturity and spot rate calculations use different discount rates to determine the present market value ... Read Answer >>
  5. What is the difference between a simple moving average and an exponential moving ...

    The only difference between these two types of moving average is the sensitivity each one shows to changes in the data used ... Read Answer >>
  6. What does a negative bond yield mean?

    Find out what it means when a bond has a negative yield and what circumstances must arise for the yield to be negative when ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center