What is over par?

"Above Par" is a term that concerns a situation where the bond price of its nominal value is. If a bond is traded over par, it means that market interest rates have fallen since their initial issue. Most bonds trade above or below their initial nominal value. Investors will pay a bonus for a higher level of the coupon, even paying through the nominal value. For example, a $ 1,000 dollar, a five -year bond that pays an annual coupon of 10 percent, may have a real value of $ 1,168 if its coupon's value beats the market rate of 6 percent. Investors who want to buy this bond should therefore expect to pay an closer $ 1,168 USD than the initial value of $ 1,000. When paying $ 1,168 for a bond of $ 1,000, the investor needs an investor that the bond will remain on or over its current Value before trading. If it falls below $ 1,168, the investor is likely to lose money after trading.

Along these lines, buying over valer bonds may be risky. Imiters of the bonds may ask to be redeemed before the expected maturation, within the agreed conditions. Although usually a problem with discount bonds, steam bonds can also risk default values. It pays for premiums and the trader must be sure that the bond will be valid in trading in the future.

bond buyers who plan fully mature do not have to worry about nominal value. All bonds will be applied when maturing for their initial value if they are not default. Private bonds usually start at $ 1,000 and government bonds can be $ 10,000 or more.