Par Value: Definition And Significance

Par Value is a phrase used to describe the face value of a bond, stock certificate or other fixed-income security. The face value of a bond is the same as the value stated in the corporate charter and it is often unrelated to the market. It is important to understand the concept of Par Value when it comes to understanding the value of a bond or other fixed-income instrument.

The term Par Value, which may also be referred to as the nominal or original value, is used to describe the face value of a bond or its associated coupon payment. This face value is generally specified in the corporate charter or bylaws, and it represents the principal sum promised to the bondholder at maturity. It is important for the bondholder to know this face value because it establishes the amount that will be repaid to the bondholder, as well as the dollar value of coupon payments made during the life of the bond.

The face value of a stock certificate can also be referred to as its “Par Value”. This is the value stated in the corporate charter, and it is usually unrelated to the actual trading price of the shares. For investors, understanding the Par Value of a stock is important because it provides information about the potential risks associated with the stock.

Par Value is of great significance to investors and bondholders because it establishes the dollar amount that will be received upon the maturity of the bond. It also determines the annual interest payments that will be received and the tax implications associated with the investment. By understanding the concept of Par Value, investors can make more informed decisions when it comes to investing in bonds and other fixed-income securities.

Overall, Par Value is an important concept that investors should consider when making decisions about bonds, stocks, and other fixed-income instruments. Par Value establishes the face value of a bond, the amount of interest payments to be received, and the ultimate value of a stock certificate at maturity. Investors should use the value of Par in order to make better, more educated decisions about where to invest their funds.