Finschool By 5paisa

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A financial concept known as “face value” refers to a security’s nominal or monetary value as indicated by its issuer. The original cost of the stock, as stated on the certificate, serves as the face value for stocks. The term “par value” or simply “par” is frequently used to refer to the face value of bonds.

The face value of a stock is its initial purchase price, as stated on its certificate; the face value of a bond is the amount that will be paid to the investor when the bond matures.

Because there are other influencing factors at work, such as supply and demand, the face value of a stock or bond is not a reliable indicator of its actual market worth.

If the bond issuer doesn’t default, face value, also known as the par value, is the sum that is paid to a bondholder at the bond’s maturity date. Bonds offered on the secondary market do, however, change in response to interest rates. For instance, the bond is sold at a discount if interest rates are higher than its coupon rate (below par).

The bond is sold at a premium, on the other hand, if interest rates are higher than the bond’s coupon rate (above par). While a bond’s face value guarantees a return, a stock’s face value is typically a poor indicator of its true value.

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