7.4
Buying Bonds
GOALS
 Calculate the market price of bonds
 Calculate the total investment in bonds
BUSINESS MATH
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Lesson 7.4
Slide 1
Bonds
 Bonds are a form of long-term promissory
note.
 Bonds are a written promise to repay the
money loaned on the due date.
 Bondholders, or the people who own the
bonds, may keep them until the due date or
sell them to other investors.
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 2
Face Value
 Bonds are usually issued with a face, or par
value of $1,000.
 Bonds may also be issued with other par
values, such as $500, $5,000, or $10,000.
 Par value is the amount of money that the
issuer, or the organization that sells the
bonds, agrees to pay the bondholder on the
due date.
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 3
Bond Certificate
BUSINESS MATH
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Lesson 7.4
Slide 4
Market Value
 The market value of a bond is its selling price
and may be different from par value.
 If the market value is more than par value, the
bond is selling at a premium.
 If the market value is less than the par value,
the bond is selling at a discount.
 The amount of the premium or discount is the
difference between the market value and the
par value.
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 5
Buying and Selling Bonds
 Bonds are usually bought and sold through a
broker, who is a dealer in stocks and bonds.
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 6
Full Service Brokers
 Full service brokers provide advice on what
and when to buy and sell.
 They charge a broker’s commission or
brokerage fee but the commission is usually
included as part of the price the buyer pays
for a bond and not shown separately.
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 7
Discount and Online Brokers
 Discount and online brokers usually offer less
financial help but also charge less
commission.
 They usually show their commission rates on
their web sites.
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 8
Total Investment in Bonds
 To find the total investment in bonds, you
must find the market price of one bond, add
the commission if it is known, and multiply by
the number of bonds bought.
Total Bond Investment = (Market Price + Commission) × Number of Bonds
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 9
To get the market price you just take the par
value and multiply it by the Quoted Price –
but remember the quoted price is a % so
change it to a decimal
BUSINESS MATH
© Thomson/South-Western
Lesson 7.4
Slide 10
$1028.74
$891.13
$528.39
1) $1000 * 1.02874 = $1028.74
3) $1000 * .89113 = $891.13
4) $500 * 1.05678 = $528.39
BUSINESS MATH
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Lesson 7.4
Slide 11
BUSINESS MATH
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Lesson 7.4
Slide 12
BUSINESS MATH
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Lesson 7.4
Slide 13
BUSINESS MATH
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Lesson 7.4
Slide 14