Dollar Price

Definition of 'Dollar Price'


The percentage of par, or face value, at which a bond is quoted. Dollar price is one method by which the price of a bond is quoted. Bonds are used by companies, municipalities, states, and U.S. and foreign governments to finance a variety of projects and activities. For example, a municipal government may issue bonds to fund the construction of a school. A corporation, on the other hand, might issue a bond to expand its business into a new territory.

Investopedia explains 'Dollar Price'


The price of a bond can be quoted in one of two ways by the various exchanges: by dollar price and by yield. Frequently, providers of bond quotes publish both the dollar price and yield concurrently. A bond's yield indicates the annual return until the bond matures. For example, if an investor purchases a bond with a 10% coupon at its $1,000 par value, the yield is 10% ($100/$1,000). The dollar price, on the other hand, represents a percentage of the bond's principal balance, also called its par value. A bond is a loan (made to a corporate or government entity) and the par value is the loan amount.

For example, if the price of a bond is $1,120 and the par value of the bond is $1,000, the bond would be quoted at 112% in dollar terms. A bond that is selling at par (at its face value) would be quoted at 100 in terms of dollar price. A bond that is trading at a premium will have a price greater than 100; a bond that is traded at a discount will have a price that is less than 100.

As the price of a bond increases, its yield decreases. Conversely, as bond prices decrease, yields increase. In other words, the price of the bond and its yield are inversely related.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
  2. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  3. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  4. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  5. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  6. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
Trading Center