Dollar Price

AAA

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.

RELATED TERMS
  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. Yield

    The income return on an investment. This refers to the interest ...
  5. Quote

    1. The last price at which a security or commodity traded, meaning ...
  6. Security

    A financial instrument that represents an ownership position ...
Related Articles
  1. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  2. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  3. Investing News

    Fund Firm Jolts: Pimco's Isn't The First Or Worst

    When you business is built on prudence and trust, a lot can go wrong to cost you tons of clients and assets. Here are a few examples.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  5. Investing Basics

    What's a Treasury Note?

    A treasury note is a U.S. government debt security that offers a fixed interest rate and a maturity date that ranges between one and 10 years.
  6. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  7. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  9. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Short Term Hi Yld Bd

    Find out about the SPDR Barclays Short Term High Yield Bond ETF, and explore detailed analysis of the fund that tracks short-term, high-yield corporate bonds.
  10. Mutual Funds & ETFs

    ETF Analysis: SPDR Barclays Short Term Corp Bd

    Learn about the SPDR Barclays Short-Term Corporate Bond ETF, and explore detailed analysis of the exchange-traded fund tracking U.S. short-term corporate bonds.
RELATED FAQS
  1. What are the maximum Social Security disability benefits?

    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 >>
  2. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  3. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  4. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>
  5. What are the differences between debt and equity markets?

    The basic differences between the debt and equity markets include the type of financial interest they represent, the way ... Read Full Answer >>
  6. What does it signify if the term structure of an interest rate's curve is positive?

    When the term structure of interest rates is positive, it is a signal to economists the short-term yields on similar bonds ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!