Face value

Definition

Face value is the nominal or stated value of a financial instrument, such as a bond, that appears on the front of the document. It represents the amount to be repaid by the issuer at maturity.

5 Must Know Facts For Your Next Test

1. Face value is also known as par value.
2. It does not change over the life of the bond.
3. Interest payments on bonds are often calculated based on face value.
4. Face value is different from market value, which fluctuates based on market conditions.
5. At maturity, bondholders receive repayment equal to the face value of the bond.

Review Questions

• What is face value and how does it differ from market value?
• How is interest typically calculated for bonds using face value?
• What amount do bondholders receive upon maturity of a bond?

Related terms

Market Value: The current price at which an asset can be bought or sold in the market.

Coupon Rate: The annual interest rate paid on a bond, expressed as a percentage of the face value.

Maturity Date: The date on which a bond's principal amount (face value) is to be paid back in full to the bondholder.