Face Value
Face value, also known as par value, is the nominal value of a bond, stock, or other financial instrument as stated on its certificate. For bonds, it is the amount that the issuer agrees to repay at maturity. For stocks, face value is the original price set by the issuing company, often different from the market value.
Example
A bond with a face value of $1,000 will pay this amount at maturity, regardless of the bond’s market price at the time.
Key points
• Represents the stated value of a security at issuance.
• Determines the repayment amount for bonds.
• Differs from the market value, which fluctuates with trading.
Quick Answers to Curious Questions
Interest payments are calculated based on the bond's face value, not its market price, ensuring consistent returns for investors.
Face value is fixed at issuance, while market value changes based on investor demand and market conditions.
Face value provides a baseline for understanding potential returns and comparing similar securities.
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