Understanding Funding at Par: Benefits and Implications for Bond Issuers and Investors.

Funding at par

Payment of debts, such as government bonds, at face value. In 1790, Alexander Hamilton proposed that the federal government pay its Revolutionary war debts in full in order to bolster the nation’s credit.

“Funding at par” is a term used in the financial world, specifically in relation to bonds. It refers to when the market value of a bond is equal to its par or face value.

The par or face value of a bond is the amount that the issuer agrees to pay to the bondholder at maturity. This value is typically set at $1,000. When a bond is issued, it is typically sold at a price that is either higher or lower than its par value. If the bond is sold for more than its face value, it is said to be sold at a premium. If it is sold for less than its face value, it is sold at a discount.

When a bond is funded at par, the issuer sells the bond for the same price as its face value. This means that the bond is neither sold at a premium nor a discount. In this scenario, the bond’s market value is the same as the par value. This can be beneficial for the issuer as they are able to raise their desired amount of funds without offering any discount or premium.

From the investor’s perspective, buying bonds at par means that they will receive the face value of the bond upon maturity, without any additional gains or losses. However, investors may still benefit from the bond’s coupon payments, which are typically paid on a semi-annual basis to the bondholder.

Overall, funding at par is a common way for bond issuers to finance their operations without offering any discounts or premiums and for investors to receive the face value of the bond upon maturity.

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