I have reached a confusing dilemma regarding the par and notional values of a bond.
I have been told that the par value of a coupon bond is $100. However, the notional value of the bond is 1,000,000.
Do they not represent the same thing; the face value of the bond? Is there a difference? Through my years in finance I assumed they were equivalent. Google does not provide an answer.
Furthermore, if some context helps, I have been told that
- Par Value = 100
- Market Value = 100
- Maturity = 5
- Notional Value = 1,000,000
- YTM = 2.8% p.a.
- Mod. Duration = 2.35% p.a.
I am required to find the coupon rate of the bond. Naturally, I would rely on the standard discounting of cash flows to create an equation, thereby allowing to solve for the coupon rate. However, the par/notional values are creating problems
Kind regards,