How to Calculate the Selling Price of Bonds
Bonds are debt securities issued by corporations and by governments at all levels to borrow money. Bonds pay a fixed rate of interest until they mature. Each bond has a par value, which is the sum of money the issuer must pay the bond holder at maturity. Bonds are negotiable (or traded) securities, and their price varies. It’s not hard to calculate the selling price of bonds, but it’s not obvious either. That’s because bond prices aren’t quoted in dollar amounts. Instead, bond prices are quoted as a percentage of the bond’s par value.
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Instructions
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1
Determine the bond’s par value. This information is listed on the face of the bond. If you don’t have the actual bond to look at, you can find information about bonds on websites like InvestinginBonds.com and Yahoo! Finance's Bonds Center (see References and Resources).
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2
Look up the current quote for the bond. If you have an account with a brokerage firm, you should have access to look-up resources for the brokerage's bonds. If not, you can find current bond quotes at the same sites where you looked up bond par values in Step 1. A bond quote is listed as a percentage of the par (or face) value. For example, a quote of 95.5 means the bond price is 95.5 percent of the par value.
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3
Multiply the bond quote by the par value to find the selling price of the bond. Suppose a $5,000 bond is quoted at 96.15 percent. The bond selling price will be $5,000 x 0.9615 = $4,807.50.
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Tips & Warnings
U.S. Series EE and I Savings Bonds are sold by the U.S. Treasury directly to individuals. Because they are not negotiable securities, savings bonds are not traded and therefore do not have a market value or price. Savings bond value is determined by the purchase price of the bond plus accumulated interest.
Bond prices fluctuate in response to prevailing interest rates. For instance, if interest rates fall, a bond’s yield becomes more attractive. Investor demand increases, pushing the bond's price up. The reverse occurs if interest rates go up.
Another factor affecting pond prices is risk. Bonds, especially corporate bonds, are rated by services like Moody’s and Standard & Poor’s. If a company (and therefore its bonds) is considered a good credit risk, the bonds will be rated high, with AAA being the best rating. Bonds that carry more risk get lower ratings and usually command lower prices.
