Original Issue Discount (OID)
Content
Definition
The Original Issue Discount (OID) is the difference between the original face value and the actual price paid for a bond or other debt instrument.
Usage and Context
Frequently asked questions
- What is the original issue discount of OID? The original issue discount (OID) is the difference between the bond`s face value and its lower issuance price, which represents the interest that will be earned over the life of the bond.
- What is OID in debt pricing? OID in debt pricing refers to the reduction in the bond`s issuance price below its face value, which effectively increases the yield to the investor as the bond matures.
- What is the difference between OID and market discount? OID is the discount from face value at the time of issuance, while market discount occurs when a bond is purchased in the secondary market at a price lower than its face value.
Benefits
OID provides investors with an additional return through the discount, potentially offering tax advantages and increasing the bond`s yield.
Conclusion
Original Issue Discount (OID) is the difference between a bond`s face value and its issuance price, providing implied interest and potentially enhancing the bond`s yield.
