if so, why would someone buy bonds with $1000 par value and $1300 price?
The Face amount (also called the par value) of the bond may be equal to the redemption amount at maturity (often denoted by C). However, while this is usually the case, it may not always be the case.
the price of a bond depends on many factors. in particular in the bond is a coupon bond, then it's price is equal to the present value of the coupons + the present value of the redemption payment.
P = C * (1+j)^(-n) + Fr (1/(1+j) + 1/(1+j)^2 + ... + 1/(1+j)^n)
where j is the interest rate per period , r is the coupon rate per period, F is the par-value, P is the price of the bond and C is the redemption value of the bond.
Par value is the face value or what you get back at maturity/redemption.
With a bond the coupon (interest paid) is fixed. Therefore if that interest rate is not acceptable to investors then the price of the bond is the only thing that can move.
$100 5% coupon. If interest rates rise to 10% then the value of the bond will fall to $50%
what is par value of bond? Is it the amount of money that you will get back at the end of maturity?
if so, why would someone buy bonds with $1000 par value and $1300 price?
