Thursday, April 5, 2007

Buck

1/10 of a point in dollar price. Bonds are priced as a percentage of par, and "one bond" is considered 1,000 par amount. Therefore 1/10 of a point is $1 per bond. This is most commonly used by bond brokers in communicating how much commission is in the bond.

Example
The bonds are offered at 4.50% less 2 bucks. (Translation: The bond in question can be purchased at a price 2/10ths of a point less than what would be a 4.50% yield. Municipal bonds are often offered this way in between dealers. The implication is that the bond could be sold to an eventual customer at a yield equal to 4.50% and the dealer could make $2 in profit.)

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