ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A discount bond is a bond that is issued for less than its par-or face-value. Discount bonds may also be a bond currently trading for less than its face value in the secondary market. A bond is considered a deep-discount bond if it is sold at a significantly lower price than par value, usually at 20% or more.

Detailed explanation-2: -A discount bond is a bond that is issued at a lower price than its par value or a bond that is trading in the secondary market at a price that is below the par value. It is similar to a zero-coupon bond, only that the latter does not pay interest until maturity.

Detailed explanation-3: -Key Takeaways. Bond discount is the amount by which the market price of a bond is lower than its principal amount due at maturity. A bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures.

Detailed explanation-4: -Another common term is “par value, ” which is simply another way of saying face value. Most bonds are issued slightly below par and can then trade in the secondary market above or below par, depending on interest rate, credit or other factors.

Detailed explanation-5: -For example, a bond with a par value of $1, 000 is selling at a premium when it can be bought for more than $1, 000 and is selling at a discount when it can be bought for less than $1, 000. Bonds can be sold for more and less than their par values because of changing interest rates.