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Finance Glossary

Just call us Bond. Amortized bond.

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Above Par

Definition:

This is not about a bad day on the course for Tiger (when he was playing well). Rather, it's about bonds. Bonds are usually price quoted as so many cents on the dollar. That is, if a bond has a face coupon of 8% and it is trading at 100 cents on the dollar, or par, it is yielding 8%. But if the Street is nervous that the bond might not pay off, or that rampant inflation is coming and 8% might be only paltry returns, or for a host of other reasons, then the bond might trade down to only, say, 90 cents on the dollar.

The Corporation who issued the bond still owes the 8% returns, only now the bonds are yielding 8 / 0.9 = 8.9% roughly. But let's say inflation fears are just smoke on the water and the issuing corporation is doing well, then the bonds might trade up - say, to 110 cents on the dollar. In this case the 8% coupon bonds are yielding only 8 / 1.1 = 7.3%, roughly. At anything over 100, they are said to be trading above "par". If you haven't guessed it already, bonds play on a par 100 course.

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