1. Equity Securities2. Debt Securities3. Government Securities4. The Money Market

Once issued, corporate bonds trade in the secondary market between investors similar to the way equity securities do. The price of bonds in the secondary market depends on all of the following:

• Rating
• Interest rates
• Term
• Coupon rate
• Type of bond
• Issuer
• Supply & demand
• Other features i.e. Callable, convertible

Corporate bonds are always priced, as a percentage of par, and par value for all bonds is always \$1,000, unless otherwise stated.

Par Value

Par value of a bond is equal to the amount that the investor has loaned to the issuer. The terms par value, face value and principal amount are synonymous and are always equal to \$1,000.Â  Â The principal amount is the amount that will be received by the investor at maturity, regardless of the price the investor paid for the bond. Â An investor who purchases a bond in the secondary market for \$1,000 is said to have paid par for the bond.

Discount

In the secondary market, many different factors affect the price of the bond. Â It is not at all unusual for an investor to purchase a bond at a price that is below the bondâ€™s par value. Â Anytime an investor buys a bond at a price that is below the par value, they are said to be buying the bond at a discount.

Often market conditions will cause the price of existing bonds to rise and make it attractive for the investors to purchase a bond at a price that is greater than its par value. Anytime an investor buys a bond at a price that exceeds its par value, the investor is said to have paid a premium.

Corporate Bond Pricing

All corporate bonds are priced as a percentage of par into fractions of a percent. Â For example, a quote for a corporate bond reading 95 actually translates into:

Â  Â  Â 95% x \$1,000 = \$ 950

A quote for a corporate bond of 971/4 translates into:

Â  Â  Â 97.25% x \$1,000 = \$ 972.50

How to Pass the Series 62 Exam

Bond Pricing

Related Articles
1. Investing

### Are Bonds Selling At A Premium A Good Investment?

A bond with a par value â€“ or face value -- of \$1,000 is selling at a premium when its price exceeds par.
2. Investing

### What is Par Value?

Par value is a term used for investments that means original value. Itâ€™s also called face value or nominal value.
3. Investing

### The Basics Of Bonds

Bonds play an important part in your portfolio as you age; learning about them makes good financial sense.
4. Investing

### Explaining Original Issue Discount

An original issue discount is the amount below par at which a bond or other debt instrument is issued.
5. Investing

### Top 6 Uses For Bonds

We break down the stodgy stereotype to see what these investments can do for you.
6. Investing

### Investing in Bonds: 5 Mistakes to Avoid in Today's Market

Investors need to understand the five mistakes involving interest rate risk, credit risk, complex bonds, markups and inflation to avoid in the bond market.
7. Investing

### Why Would A Stock Have No Par Value?

A stock with no par value might trade for thousands of dollars. It just depends on what the market deems itâ€™s worth.
8. Managing Wealth

### How Bond Prices and Yields Work

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