Business / Taxes / Discount: When bonds sell for less than their face value, they are said to be selling at a discount. Bonds sell at a discount when the interest rate they pay is lower than the rate on more recently issued bonds or when the financial condition of the issuer weakens. In the case of rising interest rates, demand for older, lower-paying bonds drops as investors put their money into newer, higher-paying alternatives, so the prices of the older bonds drop. If a rating agency reduces a bond’s rating, the market price tends to drop because investors demand a higher yield for the additional risk they take in buying the bond. Similarly, closed-end mutual funds may trade at a discount to their net asset value (NAV) as a result of weak investor demand or other market forces. Preferred stocks may also trade at a discount. In contrast, certain bonds, called original issue discount bonds, or deep discount bonds, are issued at a discount to par value, or full face value, but are worth par at maturity.

Other Words for Discount

Discount Adjective Synonyms: reduce, mark down, deduct, lower, take or knock off
Discount Verb Synonyms: diminish, lessen, minimize, detract from

Discount Fares

Life Style / Travel / Discount Fares: Short-term promotional fares or other discounted fares of varied duration. MORE

Deep Discount Brokerage Firm

Business / Taxes / Deep Discount Brokerage Firm: A financial services company that offers rock-bottom rates for large-volume securities transactions is sometimes described as a deep discount firm. However, online brokerage firms or electronic commun MORE

Discounted Basis

Business / Finance / Discounted Basis: The yield or annual interest rate on a security sold to an investor at a discount. A bond that is sold at $4875 that matures to $5000 has a discount of $125. To calculate the discount yield: (discount MORE