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Bond Discount
(redirected from Bond Discounts)

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Bond discount
The difference by which a bond's market price is lower than its face value. The antithesis of a bond premium, which prevails when the market price of a bond is higher than its face value. See: Original issue discount.

Bond Discount
A situation in which a bond's market value is lower than its face value. Short-term bonds are often issued at a bond discount, especially if they are zero-coupon bonds. However, bonds on the secondary market may trade at a bond discount, which occurs when supply exceeds demand. A bond discount is likely when the issuer has poor or recently downgraded credit, or when current interest rates are higher than the bond's. See also: Unamortized bond discount.

bond discount


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Example Three: Bond Discounts and Premiums Example 3a (bond discount): On January 1, 2007, a trustee purchases 100,000 units of Edsel Motor Co.
Adjusted net interest margins on mortgage assets declined during 2004 primarily due to (1) an increase in short-term interest rates, (2) an increase in the amortization of loan premiums, securitization costs and bond discounts as a result of higher than expected mortgage prepayments and, to a lesser extent, (3) higher leverage and lower net interest margins on certain CMOs completed during the second half of 2004.
The amortization of bond premiums and bond discounts uses the interest method of allocation.
 
 
 
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