Quick Definition

Original Issue Discount (OID) refers to the difference between the par value of a bond at maturity and its lower issue price. It represents the interest earned by the bondholder over the life of the bond.

Examples

• 1A corporation issues a bond with a face value of $1,000 at a price of $900. The $100 difference is the OID.
• 2An investor purchases a zero-coupon bond issued at $800 with a maturity value of $1,000 after 5 years, representing an OID of $200.
• 3A municipal bond is issued at $950 with a face value of $1,000 due in 10 years, where the $50 is the OID, accruing as tax-exempt interest.

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