How Do Bonds Works?

Date: August 8, 2017

  • Present value of the coupons and principal in the holding period.
  • Bond prices are typically quoted as a percentage eg. 100.3% or 98.2% of par value of bond.
  • Bonds with prices quoted above 100% are trading at a premium.
  • Bonds with prices quoted below 100% are trading at a discount.
  • Bond prices move in the opposite direction of interest rates i.e. if interest rates rise, the price of a bond will fall and vice-versa.