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Finance


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Par Rate


The coupon rate at which the price of a bond (or a note, etc.) is made to equal its nominal value (par value or face value). A bond selling at par (par = face value) is worth the same monetary amount it was initially issued for or the same monetary amount at which it will be redeemed at maturity. The coupon of a par bond is equal to the yield at maturity (YTM). The concept of par rate is usually used in the development of fixed income securities (bonds, notes, etc.) and in constructing interest rate swaps.

A par yield curve represents bonds that are selling at par, i.e., it depicts, graphically, the yield to maturity against term to maturity for a host of bonds trading at par.

Par rate is also known as par yield.


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