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NISM Certifications · NISM-Series-XV: Research Analyst · Terminology in Equity and Debt Markets

In bond market terminology, a bond that is quoted at a price below its face value is said to be trading at:

A bond quoted below its face value is said to trade at a discount. This usually happens when prevailing market yields exceed the bond's coupon rate, so investors pay less than the face value to earn the required return.

  1. AA premium
  2. BA discountCorrect
  3. CPar
  4. DAccrued value

Explanation

A bond priced below face value trades at a discount. This typically occurs when the market yield is higher than the coupon rate. A premium would mean the price is above face value, and par means equal to face value.

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