Term: Face Value
Type: Financial term
Used in: Bonds, stocks, accounting
Also Known As: Par value, nominal value
Definition
Face value is the original value printed on a financial instrument, such as a bond or stock certificate. For bonds, it represents the amount the issuer agrees to repay at maturity — usually in increments like $1,000.
For stocks, face value (or par value) is a nominal amount assigned at issuance, often $0.01 or less, and has little relation to the stock’s market price.
While face value is often symbolic for stocks, it’s critical for bonds and insurance policies, where it determines payouts and premiums.
Key Features
- For bonds, it’s the repayment amount at maturity
- For stocks, it’s a legal accounting figure
- Does not reflect market value
- Also used in insurance and accounting records
Common Use Cases
- Calculating bond interest payments
- Understanding maturity payouts
- Determining life insurance death benefits
- Recording company equity on balance sheets
Benefits or Advantages
- Provides a fixed reference point for investors
- Helps calculate coupon interest payments
- Used in regulatory or contractual obligations
- Helps structure capital and equity issuance
Examples or Notable Applications
– A $1,000 face value bond paying 5% = $50 annual interest
– A company may issue stock with $0.01 face value
– Life insurance face value is the amount paid on death
– Not to be confused with market value or book value
External Links
This post is for informational purposes only and does not constitute investment advice.