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Above Par

What is 'Above Par'

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.

Explaining 'Above Par'

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)


Further Reading


An empirical comparison of published replication research in accounting, economics, finance, management, and marketing
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11 Finance, capital markets and economic growth in Japan”11 Finance, capital markets and economic growth in Japan”
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… Notwithstanding the above, success stories demonstrating how replication and extension research can lead to … the original and repli- cated/extended studies in the accounting, economics, finance, management, and … Consequently, their timeliness is of par- ticular interest …

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Q&A About Above Par


What is the par value of a share?

The par value of a share is the minimum price at which it can be sold.

How do you determine the theoretical price of a bond trading above par?

N = 5 years IY = 6 (market rate, 6) FV = 1, (face value) PMT = 1 (1 coupon) PaymentsYear = 1 (annual coupon payment) ""

What does par value have to do with accounting?

Par value has to do with accounting because it is stated in corporate charters and acts as a cap on how low shares can be sold for.

Why would an investor buy a bond above par?

The investor will incur a capital loss when the bond is redeemed for face value at maturity.

How are bond prices affected by par values?

Bond prices are not affected by par values, but rather by interest rates.

What does above par mean?

Above par means that the price of a security is trading higher than its face value.

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