Glossary term
Face Value
Face value is the stated value of a security, most often the amount a bond issuer agrees to repay at maturity, also called par value.
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What Is Face Value?
Face value is the stated value of a security. In bonds, it is usually the amount the issuer agrees to repay when the bond matures. Face value is also called par value, especially in fixed income.
The term can appear with stocks and insurance policies, but it matters most for bonds because coupon payments, maturity repayment, premiums, and discounts are often described relative to face value.
Key Takeaways
- Face value is the stated value of a security.
- For bonds, face value is usually the amount repaid at maturity.
- Face value is often called par value.
- A bond's market price can trade above or below face value.
- Coupon rates are usually quoted as a percentage of face value, not current market price.
How Face Value Works
Suppose a bond has a face value of $1,000 and a 5 percent coupon rate. The annual coupon is based on the $1,000 face value, so the bond pays $50 per year in interest. If the bond later trades for $950 or $1,050, the coupon payment is still tied to the original face value unless the bond's terms say otherwise.
At maturity, the issuer generally repays face value to the bondholder. That maturity repayment is one reason bond prices tend to be discussed as trading at par, at a premium, or at a discount.
Face Value Versus Market Value
Measure | What it means |
|---|---|
Face value | The stated amount, usually the bond amount repaid at maturity |
Market value | The current price investors are willing to pay for the bond |
A bond trading at par is priced near face value. A bond trading above face value is trading at a premium. A bond trading below face value is trading at a discount.
Why Face Value Matters
Face value helps investors understand bond income and repayment. A bond's coupon rate is usually calculated from face value, while the investor's actual yield depends on the price paid. Buying a bond below face value can raise the yield relative to the coupon rate. Buying above face value can lower it.
This is why the face value alone does not tell you whether a bond is attractive. The price, coupon, maturity date, credit quality, call features, and interest-rate environment all affect the real investment outcome.
Face Value in Stocks
For common stock, face value or par value is usually a legal and accounting concept. It is not the same as the stock's trading price and usually does not tell investors much about what the company is worth in the market.
The Bottom Line
Face value is the stated value of a security. For bonds, it is usually the amount repaid at maturity and the base used to calculate coupon interest, even though the bond's market price can move above or below that amount.