face value

Face value

See: Par value

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face value

See par value.

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Face value. Face value, or par value, is the dollar value of a bond or note, generally $1,000.

That is the amount the issuer has borrowed, usually the amount you pay to buy the bond at the time it is issued, and the amount you are repaid at maturity, provided the issuer doesn't default.

However, bonds may trade at a discount, which is less than face value, or at a premium, which is more than face value, in the secondary market. That's the bond's market value, and it changes regularly, based on supply and demand.

The death benefit of a life insurance policy which is the amount the beneficiary receives when the insured person dies. It's also known as the policy's face value.

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face value

The value of an instrument (promissory note, bond, stock, etc.) as stated on the face of the instrument.The face value does not always equal the market value.

Example: A 5-year-old mortgage note with a face value of $100,000 and an amortization term of 20 years at 2.8 percent interest is worth far less than $100,000 for two reasons: (1) The principal balance is now a little under $80,000. (2) Why would anyone invest even $80,000 to earn 2.8 percent interest when he or she can get better returns in the marketplace? For both reasons, an investor would pay much less than the $100,000 face value to buy the mortgage.

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Face Value

What Does Face Value Mean?

The nominal or dollar value of a security at the time it is issued. For stocks, it is the original cost of the stock shown on the certificate. For bonds, it is the amount paid to the holder at maturity (generally $1,000). Also known as par value or par.

Investopedia explains Face Value

In bond investing, face value, or par value, commonly refers to the amount paid to a bondholder at the maturity date, assuming the issuer does not default. However, bond prices on the secondary market fluctuate with interest rates. For example, if interest rates are higher than a bond's coupon rate, the bond is sold at a discount (below par). Conversely, if interest rates are lower than the bond's coupon rate, the bond is sold at a premium (above par).

Related Terms:
• Bond
• Fair Value
• Market Value
• Par Value
• Premium