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.  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.  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.  It is not at all unusual for an investor to purchase a bond at a price that is below the bond’s par value.  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.  For example, a quote for a corporate bond reading 95 actually translates into:

95% x \$1,000 = \$ 950

A quote for a corporate bond of 97 1/4 translates into:

97.25% x \$1,000 = \$ 972.50

Bond Yields

Related Articles
1. Investing

### Corporate Bond Basics: Learn to Invest

Understand the basics of corporate bonds to increase your chances of positive returns.
2. 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.
3. Investing

### 6 Ways That Investors Use Bonds

Learn how the stodgy stereotype of bonds can overshadow the basic and advanced uses of what these investments can do for your portfolio.
4. Managing Wealth

### How Bond Prices and Yields Work

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

### Why Companies Issue Bonds

When companies need to raise money, issuing bonds is one way to do it. A bond functions as a loan between an investor and a corporation.

### Calculate PV of different bond type with Excel

To determine the value of a bond today — for a fixed principal (par value) to be repaid in the future — we can use an Excel spreadsheet.
7. Investing

### 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.
8. Investing

### 4 basic things to know about bonds

Learn the basic lingo of bonds to unveil familiar market dynamics and open to the door to becoming a competent bond investor.
9. Investing

### Simple Math for Fixed-Coupon Corporate Bonds

A guide to help to understand the simple math behind fixed-coupon corporate bonds.
10. Investing

### The Best Bet for Retirement Income: Bonds or Bond Funds?

Retirees seeking income from their investments typically look into bonds. Here's a look at the types of bonds, bond funds and their pros and cons.