ABOVE PAR
Above Par: translation
A term used to describe the price of a security when it is trading above its face value. A security usually trades at above par when its income distributions are higher than those of other instruments currently available in the market.If an investor purchases a security above face value, he or she will incur a capital loss at maturity when it is redeemed for face value.
For example, a 5-year bond with $1,000 face value that pays a coupon of 10% annually may trade closer to $1,168 if similar bond rates decline to 6%. This is because investors are willing to pay more for a higher coupon; thus, it is said to be trading above par.
In order to make its yield equal current market rates, the bond should trade at its present value.
In the above example, the following calculation was used to determine the theoretical price the bond would trade at
N = 5 years
I/Y = 6 (market rate, 6%)
FV = $1,000 (face value)
PMT = $100 (10% coupon)
Payments/Year = 1 (annual coupon payment)
- above par—above par translationabove parbetter than average or normal. His work is above par so he should get paid better....Dictionary of American idioms
- above par—above par translation See par. Bloomberg Financial Dictionaryu above parstrong above par adjective adverb FINANCE at a price that is above the original value when s...Financial and business terms
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