Discounted Basis

Discounted Basis - When any financial security, whether it is a stock, bond or money market, is to be sold one consideration is that it has an established value. Sometimes in order to sell one of these securities, it is necessary to reduce the selling price to reflect the cost of the transaction and take into consideration the value the security would have on its pre-determined maturity date. If the interest or carrying cost is to be covered, then the selling price is lowered or ?discounted? proportionately to allow for these costs, thus, the interest or carrying costs added the selling price would be the same as the value at maturity.