Dollar Price of Bonds in 2025: Understanding Costs and Market Value

Gordon Scott has been a dedicated investor and technical analyst for over 20 years and holds the Chartered Market Technician (CMT) designation.

What Is Dollar Price in Bond Investing?

The dollar price of a bond represents the actual amount an investor pays to acquire it. When a bond is initially issued, this price matches its face or par value.

However, if the bond is traded in the secondary market before maturity, its dollar price usually diverges from the face value and is expressed as a percentage of par. Dollar price is one of the primary ways to quote bond prices, alongside yield.

Key Points to Remember

• Dollar price is the purchase price of a bond.
• It’s commonly shown as a percentage of the bond’s par value.
• Dollar prices fluctuate in the secondary market as bonds trade.

Why Dollar Price Matters in Bond Markets

Bonds are vital financing tools for governments, municipalities, and corporations to fund projects—from building schools to expanding businesses.

Exchanges typically quote bonds either by dollar price or yield, with many providing both simultaneously. While yield reflects the annual return until maturity, dollar price shows the upfront cost.

A bond priced at par will be quoted as 100%. Bonds trading above par are at a premium (above 100%), whereas those below par are at a discount (below 100%).

Important Insight

There is an inverse relationship between bond prices and yields: when bond prices rise, yields fall, and vice versa.

Comparing Bond Yield and Dollar Price

Consider a bond with a $1,000 face value and a 10% annual coupon rate, maturing in five years. It pays $100 yearly in interest.

If market interest rates climb above 10%, the bond’s price drops because newer bonds offer better returns. For instance, if similar bonds yield 12.5%, our bond’s fixed $100 coupon becomes less attractive.

To sell, the bond’s price might be reduced to approximately $927.90 to align its yield with the market rate of 12%. This adjustment reflects the time value of money and market conditions.

Conversely, if interest rates fall to 7.5%, the bond’s price could rise to about $1,101.15 because its coupon payments are comparatively more valuable.

Practical Dollar Price Example

Imagine purchasing a bond with a 10% coupon and $1,000 par value at issuance, so the dollar price is $1,000.

If the market price rises to $1,120, the dollar price is quoted at 112%. Selling at this price yields a $120 profit plus any interest earned.

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