What Is Current Price?
The current price is the most recent selling price of a stock, currency, commodity, or precious metal that is traded on an exchange and is the most reliable indicator of that security's present value.
- Current price is the most recent price at which a security was sold on an exchange.
- Current price serves as a baseline for buyers and sellers.
- Current price is an indicator of current value, but the real price of the next sale may be higher or lower depending on supply and demand.
Understanding Current Price
Current price is also known as market value. It is the price at which a share of stock or any other security last traded. In an open market, the current price functions as a baseline. It indicates the price a buyer would be willing to pay and a seller would be willing to accept for a subsequent transaction in that security.
In the case of a bond, the current price is often quoted as 10% of par or face value. That is, a bond that is reported as currently trading at $99 is actually priced at $990.
Current price is an indicator but not a guarantee. On an exchange, the current price does not dictate the next sale price. Changes to the supply and demand associated with the security will shift its price continuously.
There are a number of terms that are similar or identical in meaning to current price. These include:
- Current value, an accounting method in which assets are priced according to their replacement value rather than their original costs.
- Current yield, an estimate of the annual income of an investment that is based on dividing the total income by the current price.
- Cash price is the latest quoted price on an exchange and is thus synonymous with current price.
Types of Current Price
Current Price in Over-the-Counter (OTC) Trades
When a security is sold over-the-counter (OTC) rather than on an exchange, the current price is based on the current bid price listed by buyers and the current ask price listed by sellers. Dynamic in nature, the current price in an OTC trade fluctuates based on supply and demand.
Current Price in the Bond Market
A bond’s current price is determined by comparing the current interest rate to the interest rate associated with the bid. The par or face value is then adjusted based on the remaining interest payments due until the bond reaches maturity. The closer a bond is to maturity, the closer the current price will be to the face value listed on the bond.
Current Price in Retail Sales
In a retail store, the current price of any item is the amount being charged for it at that moment. If the item is on sale, the current price will be lower than the retail price for that item.