Frequently Asked Questions

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Why are bonds issued at discounted prices?


A bond is traded at a lower price than its par value when the prevailing interest rates in the market are higher than the bond discount rate. The demand for such bonds may decrease as investors willing to get higher returns will be less attracted to bonds offering lower interest rates than the current market interest. Lower demand can result in reduced bond prices. Bonds are issued at a discount to offer a sufficient return to the investors. The difference caused by the face value being higher than the purchase price is the key advantage of such bonds.