Par value

Definition

Par value is the nominal or face value of a bond, typically $1,000, that indicates its maturity value and the amount to be paid back to the bondholder at maturity. It also serves as the basis for calculating interest payments on the bond.

5 Must Know Facts For Your Next Test

1. Par value is usually set at $1,000 for corporate bonds.
2. Interest payments, or coupon payments, are calculated based on the par value.
3. Par value does not fluctuate with market conditions; it remains constant throughout the life of the bond.
4. Bonds can trade at a discount (below par value) or premium (above par value) depending on market interest rates.
5. At maturity, bondholders receive the par value regardless of whether they bought the bond at a discount or premium.

Review Questions

• What is typically considered the standard par value for corporate bonds?
• How does par value influence interest calculations on a bond?
• Does par value change over time with market conditions?

Related terms

Coupon Rate: The annual interest rate paid on a bond's par value.

Discount Bond: A bond sold for less than its par value.

Premium Bond: A bond sold for more than its par value.