Bond Price Reporting

Although most bond trading is OTC, there is a corporate bond market associated with the New York Stock Exchange and other major exchanges. If you were to look in The Wall Street Journal (or a similar financial newspaper), you would find price and volume information from this market on a relatively small number of bonds issued by larger corporations. This particular market represents only a sliver of the total market, however. Mostly, it is a "retail" market, meaning that smaller orders from individual investors are transacted here.

Figure 7.3 reproduces a section of the bond page from the May 11, 2001, issue of The Wall Street Journal. If you look down the list, you will come to an entry marked "ATT 6s09." This designation tells us that the bond was issued by AT&T, and that it will mature in 09, meaning the year 2009. The 6 is the bond's coupon rate, so the coupon is 6 percent of the face value. Assuming the face value is $1,000, the annual coupon on this bond is .06 X $1,000 = $60. The small "s" stands for "space" and is just used to separate the coupon and maturity where it might otherwise be confusing.

The column marked "Close" gives us the last available price on the bond at close of business the day before. As with the coupon, the price is quoted as a percentage of face value; so, again assuming a face value of $1,000, this bond last sold for 93.875 percent of $1,000, or $938.75. Because this bond is selling for about 94 percent of its par value, it is trading at a discount. The last column, marked "Net Chg," indicates that yesterday's closing price was .25%, or $2.5, higher than the previous day's closing price.

Ross et al.: Fundamentals I III. Valuation of Future I 7. Interest Rates and Bond I I © The McGraw-Hill of Corporate Finance, Sixth Cash Flows Valuation Companies, 2002

Edition, Alternate Edition

Sample Wall Street Journal Bond Quotation

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