Above Par

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.

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)

Investment dictionary. . 2012.

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Look at other dictionaries:

  • above par — see under ↑par1 • • • Main Entry: ↑above above par At a premium, or at more than the nominal value • • • Main Entry: ↑par * * * above (or below or under) par better (or worse) than is usual or expected …   Useful english dictionary

  • Above par — Par Par, n. [L. par, adj., equal. See {Peer} an equal.] [1913 Webster] 1. Equal value; equality of nominal and actual value; the value expressed on the face or in the words of a certificate of value, as a bond or other commercial paper. [1913… …   The Collaborative International Dictionary of English

  • above par — index meritorious, notable, noteworthy, preferable, superior (excellent), valuable Burton s Legal Thesaurus. William C. Burt …   Law dictionary

  • above par — Better than average or normal …   The small dictionary of idiomes

  • above par — See: par. Bloomberg Financial Dictionary * * * above par aˌbove ˈpar adjective, adverb FINANCE at a price that is above the original value when shares and bonds were first made available: • The jeans maker s bonds are trading above par. * * *… …   Financial and business terms

  • above par — above average, beyond what is expected …   English contemporary dictionary

  • above par — See: par value …   Accounting dictionary

  • above par — See par value …   Big dictionary of business and management

  • above par — /əˌbʌv pɑ:/ adjective referring to a share with a market price higher than its par value …   Dictionary of banking and finance

  • above par —  In good health and spirits …   A concise dictionary of English slang

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