When referring to the value of financial instruments, there’s no difference between par value and face value. Both terms refer to the stated value of the financial instrument at the time it is issued. Par value is more commonly used with bonds than with stocks.

What does it mean if a bond is priced at par value?

A par bond is a bond that sells at its exact face value. This typically means that a bond sells for $1,000, since this is the face value of most bonds. If the market interest rate subsequently declines to 4%, then the coupon rate on the bond will look more attractive, and investors will bid up the price of the bond.

How do I know the par value of a bond?

For example, a bond with par value of $1,000 and a coupon rate of 4% will have annual coupon payments of 4% x $1,000 = $40. A bond with par value of $100 and a coupon rate of 4% will have annual coupon payments of 4% x $100 = $4.

What does it mean for a bond to be sold at par?

face value
When a company issues a new bond, if it receives the face value of the security the bond is said to have been issued at par. If the issuer receives less than the face value for the security, it is issued at a discount.

Is bond par value fixed?

Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. Par value for a share refers to the stock value stated in the corporate charter. Shares usually have no par value or very low par value, such as one cent per share.

What is the point of par value?

Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par, depending on factors such as the level of interest rates and the bond’s credit status.

Does par value of bond change?

It’s important to note that the par value of a bond—the amount you will receive at maturity—will never change regardless of the market rate or bond price. The par value itself, and thus the value of a bond payable upon maturity, will never change, regardless of the bond price or market interest rates.