Glossary
Face value (par value)
The amount a bond pays back at maturity, commonly $1,000, on which coupon payments are calculated.
On this page
Face value, also called par value, is the amount a bond's issuer promises to repay the holder at maturity. It is also the base on which the coupon is calculated. Most US corporate and municipal bonds have a $1,000 face value, while Treasury securities can be bought in $100 increments. The bond's market price drifts above or below face value as interest rates and credit quality change, but the face amount itself is fixed.
How it works
Bond prices are quoted as a percentage of par, so a quote of 100 means the bond trades at face value.
Buying below par adds a gain at maturity, which is why the yield to maturity of a discount bond exceeds its coupon rate; the reverse is true for a premium bond.
Two other meanings
- Stock par value. Shares also carry a par value in the corporate charter, often a fraction of a cent. It is a legal and accounting artifact and says nothing about what the stock is worth.
- Zero-coupon bonds pay no coupon and are sold well below face value; the whole return is the climb back to par.
Face value is only paid if the issuer does not default; it is a promise, not a guarantee.