Par Value
Quick Definition
The face value of a bond, typically $1,000, representing the amount repaid to the bondholder at maturity.
Key Takeaways
- Typically $1,000 for corporate and government bonds
- The amount repaid to bondholders at maturity
- Coupon payments are calculated as a percentage of par value
- Bonds trade at par, premium (above), or discount (below) based on market conditions
What Is Par Value?
Par value (also called face value or nominal value) is the amount a bond issuer agrees to repay the bondholder at maturity. For most corporate and government bonds, par value is $1,000 per bond. A bond trading at par sells for exactly its face value; above par is called a premium, and below par is a discount. Par value serves as the reference point for calculating coupon payments (a 5% coupon on $1,000 par = $50/year), expressing bond prices as a percentage (a bond at 98 trades at $980), and determining yield to maturity. While par value is a fixed contractual amount, a bond's market price fluctuates based on interest rates, credit quality, and time to maturity.
Par Value Example
- 1A $1,000 par value bond with a 4% coupon pays $40 per year in interest until maturity
- 2When interest rates rise above a bond's coupon rate, the bond trades below par (at a discount) to compensate buyers
Related Terms
Bond Discount
When a bond trades below its face (par) value, typically because its coupon rate is lower than prevailing market interest rates.
Bond Premium
When a bond trades above its face (par) value, typically because its coupon rate is higher than prevailing market interest rates.
Coupon Rate
The annual interest rate stated on a bond, expressed as a percentage of face value, that determines the periodic coupon payments.
Maturity Date
The date on which a bond's principal (face value) is repaid to the investor and interest payments cease.
Bond
A fixed-income debt security where investors loan money to an issuer in exchange for regular interest payments and return of principal at maturity.
Treasury Bond (T-Bond)
A long-term U.S. government debt security with a maturity of 20 or 30 years, paying semiannual coupon interest.
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