Dollar Price

A bond has a contractual face amount and a market value, which can differ after issuance or even at the initial sale, and the quoted price shows what buyers and sellers are willing to exchange under the stated market convention. Percentage-of-par quotation makes different holding sizes comparable, so a price of 98 can be applied to $1,000, $10,000 or another face amount, with the money consideration changing with size even when the quoted percentage is identical.

FINRA investor guidance distinguishes par value from bond prices that can trade at a premium or discount, but the relevant convention should still be checked for the actual security because a label alone is not enough to determine an executable settlement amount. A discount means a quoted price below par and a premium means a quoted price above par, but neither label alone establishes whether the investment is attractive, because coupons, maturity, credit and available alternatives also matter.

The coupon is a contractual payment rate and is not the same as the quoted price or the investor's yield, and buying at a premium or discount changes the relationship between the payment stream and the amount invested. Yield converts price and expected cash flows into a return measure under stated assumptions, so the same price can imply different yields for bonds with different coupons or maturities and price percentages alone cannot identify the better return.

Price and yield usually move in opposite directions for fixed cash flows, so when the required yield rises the price generally falls, although credit changes, option features and uncertain cash flows can complicate the interpretation. Accrued interest affects settlement, as many bonds trade using a clean price that excludes accrued interest and then add that interest to the amount payable, while other instruments or markets can use different conventions.

The dirty or full price includes accrued interest under that terminology, and a reviewer should confirm which number appears in a quote or report, since treating a clean price as the complete cash requirement can underfund settlement. Transaction costs require separate checking, because markups, markdowns, commissions or fees can be reflected in different ways and a visible quote may not include every cost the investor ultimately pays.

Principal repayment is subject to the bond's terms and credit outcome, so buying below par does not guarantee collection of the full face amount, and default, restructuring or early redemption can change expected cash flows. Callable features can affect the relevant yield, since a premium bond may be redeemed earlier under its terms, and yield-to-maturity alone can be an incomplete comparison when an earlier call is possible.

Records should identify face amount, price basis, accrued interest and charges, and the trade confirmation should be reconciled to the expected cash amount. A correct quoted percentage is not enough if the settlement calculation uses the wrong size or convention.

For a non-finance manager, translate the quotation into actual cash before approving a transaction. Then compare yield, credit and terms rather than interpreting a low price as a bargain.

Dollar price describes the buying amount, not a guaranteed investment result.