What is the standard basis for quoting bond prices?

The standard basis for quoting bond prices is on face value. This approach is widely used in the bond market to ensure uniformity and ease of comparison across different bonds. The face value, also known as par value, refers to the nominal value of the bond, which is typically $1,000 for most bonds. When prices are quoted as a percentage of face value, it facilitates investors in understanding how much they would pay relative to the bond's original value.

For instance, if a bond is quoted at 105, it means that the bond is priced at 105% of its face value, which would be $1,050 for a bond with a par value of $1,000. This method of quoting prices helps investors quickly assess the market price of a bond in relation to what they would receive upon maturity.

While yield to maturity and interest earned are important factors to consider when evaluating a bond's profitability, they do not serve as the standard for quoting bond prices in the marketplace. Price quoting based on yield can vary widely depending on market conditions and the specific characteristics of the bond. Therefore, the conventional and most recognized practice remains quoting prices based on face value.