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.

BREAKING DOWN '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.

  1. Yield To Maturity (YTM)

    The total return anticipated on a bond if the bond is held until ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Par Value

    The face value of a bond. Par value for a share refers to the ...
  4. Quote

    1. The last price at which a security or commodity traded, meaning ...
  5. Yield

    The income return on an investment. This refers to the interest ...
  6. Maturity

    The period of time for which a financial instrument remains outstanding. ...
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