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Face Value

Candlefocus Editor

Face value, also known as par value, is the initial price of a bond or stock, as stated by the issuing party. This dollar value is typically set at the time of issue, and is usually printed on the certificate of the bond or stock. For bonds, the face value is the amount of money that is due to be paid to the investor when the bond reaches maturity. As for stocks, the face value is the initial cost of the stock and is also sometimes referred to as its par value.

While the face value of a bond or a stock may seem like it should indicate the actual market value, this is not the case. Bond and stock prices are influenced by various other forces, such as the current market climate, the perceived risk associated with the asset, the quality of the issuer, and the supply and demand on the market. As such, the face value may bear little resemblance to the actual market value. In fact, share values may be much higher or lower than the face value.

For example, corporate bonds are often issued with a face value of $1,000, but the actual trading value may be much higher than the face value. This means that while the investor may only be due to receive $1,000 when the bond reaches maturity, he or she may find that he or she can sell it for a much higher dollar figure than the face value. Conversely, a stock may have a face value of $50, but the market demand for that stock may be so low that it is actually only worth $30.

It is important for investors to bear in mind that the face value of a bond or a stock should not be taken as its actual market value. Investors should examine the other influential variables on the market through research and analysis before investing in any assets.

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