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Understanding bond market prices For example, if a bond is quoted at 99 in the market, the price is $990 for every $1,000 of face value and the bond is said to be trading at a discount. If the bond is trading at 101, it costs $1,010 for every $1,000 of face value and the bond is said to be trading at a premium.
If the face value of the bond is $1,000 and the quoted price is 97, it means that the bond will sell at 97% of the par value. It can be because the market interest rate would have been higher than the stated interest rate. In such a case bonds sell at a discount. So the bond will sell for $1,000 X 97% = $970.
The discounted cash flow method is one of the most widely used methods to value a bond. In this method, the cash flows received from the bond (i.e., coupon and par value) are discounted at the market rate. Then the present value of all the cash flows is summed up to get the value of the bond.
Question: A $1,000 face value bond with a quoted price of 98 is selling for $980.
The bond valuation formula can be represented as: Price = ( Coupon 1 ( 1 + r ) n r ) + Par Value ( 1 + r ) n .
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0:50 2:11 Years interest rates for series EE bonds are set at the time of purchase. They are guaranteed toMoreYears interest rates for series EE bonds are set at the time of purchase. They are guaranteed to double in value if held for 20. Years.
Bonds are quoted as a percentage of their $1,000 or $100 face value. 7 For example, a quote of 95 means the bond is trading at 95% of its initial face value. Face value quotes allow you to easily calculate the bonds dollar price by multiplying the quote by the face value.

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