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Par value is the face value, or named value, of a stock or bond.
With stocks, the par value, which is frequently set at $1, is used as an accounting device but has no relationship to the actual market value of the stock.
But with bonds, par value, usually $1,000, is the amount you pay to purchase at issue and the amount you receive when the bond is redeemed at maturity.
Par is also the basis on which the interest you earn on a bond is figured. For example, if you are earning 6% annual interest on a bond with a par value of $1,000, that means you receive 6% of $1,000, or $60.
While the par value of a bond typically remains constant for its term, its market value does not. That is, a bond may trade at a premium, or more than par, or at a discount, which is less than par, in the secondary market.
The market price is based on changes in the interest rate, the bond's rating, or other factors.
- the face or nominal value of a SHARE in the UK. Par values may be of any amount, though 25p or £1 are the most common par values. The par value of a share bears little relationship to its market value, which is determined by demand and supply for the shares. A company can change the par value of its shares by a reorganization or SHARE SPLIT, for example issuing four 25p par value shares for every £1 share held.
- the fixed price of a FOREIGN CURRENCY under a FIXED RATE EXCHANGE SYSTEM.
- the coupon price of a FINANCIAL SECURITY; for example, the initial face value or nominal price of an ORDINARY SHARE (as opposed to its market price). For example, a JOINT-STOCK COMPANY may issue ordinary shares with a par value of, say, 25p although its market price on the STOCK EXCHANGE may be higher or lower than this par value, depending upon current demand and supply for it.
- The fixed price of a CURRENCY in terms of other currencies under a FIXED EXCHANGE-RATE SYSTEM.