Suppose that a company is attempting to raise $100,000 in the form of debt. Issuance Price: The offering price that the bonds were sold for on the date of sale.the amount obligated to be returned on the date of maturity. Redemption Price: The par value of the bonds, i.e.Original Issue Discount (OID) = Redemption Price – Issuance Price The original issue discount is equal to the difference between the stated redemption price and the issuance price. In such cases, since the bondholder purchased the bonds at a discount price lower than the par value, there is a greater chance of obtaining higher returns. The inclusion of an OID is most often related to making the debt offering more attractive to potential investors. the “haircut”) is around the 1% to 2% range. Typically, the reduction from the redemption price (i.e. The original issue discount (OID) is the difference between the redemption price and the discounted offering price of the debt. the par value – an original issue discount (OID) is created. If a debt instrument is sold at a discounted price lower than the redemption price – i.e. An Original Issue Discount (OID) refers to a feature of debt financing in which the issuance price is less than the stated redemption price.Īn original issue discount (OID) occurs when debt securities are sold below their redemption price.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |