Glossary term
Par Value
Par value is the stated face value of a bond or the nominal value assigned to a share of stock.
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What Is Par Value?
Par value is the stated face value of a security. For a bond, it is usually the amount the issuer promises to repay at maturity. For stock, it is a nominal value assigned in corporate documents and is usually far below the market price.
The same phrase matters differently depending on whether the security is a bond or a share of stock. In bonds, par value is central to maturity repayment and coupon calculations. In common stock, par value is often more of a legal and accounting convention.
Key Takeaways
- For bonds, par value is the face amount typically repaid at maturity.
- For stocks, par value is a nominal amount assigned in the corporate charter or share documents.
- Market value can be above, below, or equal to par value.
- A bond trading below par is at a discount; one trading above par is at a premium.
Bond Par Value
Bond par value is usually the principal amount used to calculate coupon payments and maturity repayment. A bond with a $1,000 par value and a 5% annual coupon pays $50 of annual interest, usually split according to the bond's payment schedule.
If the bond trades before maturity, its market price may differ from par. Interest rates, credit risk, call features, liquidity, and time to maturity all affect the price.
Price Relative to Par | Meaning |
|---|---|
At par | The bond trades at its face value. |
Below par | The bond trades at a discount. |
Above par | The bond trades at a premium. |
Called at par | The issuer redeems the bond at its stated face amount, if terms allow. |
Stock Par Value
Stock par value is different. A corporation may assign a small nominal value, such as $0.01 per share, to common stock. That amount is not a market-price estimate and does not tell investors what the shares are worth.
Stock par value can affect legal capital and accounting entries, but public investors usually care more about earnings, cash flow, assets, voting rights, dilution, and market price.
What Not to Confuse
Par value is not the same as fair value, book value, intrinsic value, or current market value. A bond's par value may stay fixed while its market price moves every day. A stock's par value may be nearly meaningless for valuation.
The context tells you how to use the term. In a bond quote, par value relates to principal and maturity. In a stock filing, par value usually describes the legal share structure.
The Bottom Line
Par value is the stated face value of a security. It is crucial for understanding bonds, but for common stock it is usually a nominal legal and accounting figure rather than a measure of investment value.