Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the holder at maturity, typically in $1,000 denominations. The face value of bonds is often referred to as "par value" or simply "par."
Key Takeaways
Face value describes the nominal value or dollar value of a security; the face value is stated by the issuing party.
A stock's face value is the initial cost of the stock, as indicated on the certificate of the stock in question; a bond's face value is the dollar figure due to be paid to the investor, once the bond reaches maturity.
The actual market value of a stock or a bond is not reliably indicated by its face value, because there are many other influencing forces at play, such as supply and demand.
In bond investing, face value (par value) is the amount paid to a bondholder at the maturity date, as long as the bond issuer doesn't default. However, bonds sold on the secondary market fluctuate with interest rates. For example, if interest rates are higher than the bond's coupon rate, then the bond is sold at a discount (below par).
Conversely, if interest rates are lower than the bond's coupon rate, the bond is sold at a premium (above par). While the face value of a bond provides for a guaranteed return, the face value of a stock is generally a poor indicator of actual worth.
While the par value of bonds is generally static, there is a noted exception with inflation-linked bonds, whose par value is adjusted by inflation rates for predetermined time periods.
Face value and bonds
A bond's face value is the amount the issuer provides to the bondholder, once maturity is reached. A bond may either have an additional interest rate, or the profit may be based solely on the increase from a below-par original issue price and the face value at maturity.
The cumulative face value of the entirety of a company’s stock shares designates the legal capital a corporation is obligated to maintain. Only the above-and-beyond capital may be released to investors, in the form of dividends. In essence, the funds that cover the face value, function as a type of default reserve.
However, there is no requirement dictating the face value businesses must list upon issue. This affords businesses the leeway to use very low values to determine the size of the reserve. For example, the par value of AT&T shares is listed as $1 per common share, while shares of Apple Inc. have a par value of $0.00001.
Face Value vs. Market Value
The face value of a stock or bond does not denote the actual market value. Market value is determined based on principles of supply and demand. In turn, supply and demand is governed by the dollar figure where investors are willing to buy and sell the security, at a given time. In fact, depending on market conditions, the face value and market value may have very little correlation.
In the bond market, interest rates (compared with the bond’s coupon rate) may determine if a bond sells above or below par. Zero-coupon bonds, or those where investors receive no interest, aside from that associated with purchasing the bond below face value, are generally only sold below par because that's the only feasible way an investor can receive a profit.
Is Face Value the Same As Par Value?
Yes. Face value refers to the dollar value of a financial instrument when it is issued. The face value of a bond is the price that the issuer pays at the time of maturity, also referred to as “par value.” By comparison, the face value of a stock is the price set by the issuer when the stock is first issued.
What Is the Difference Between Face Value and Market Value?
While face value is the original price of a stock as set by its issuer, market value is influenced by external supply-and-demand forces. Market value is the price that the market will bear, and it can differ significantly from a stock’s initial price. For example, the face value of Apple shares is $0.00001, while the market value of its shares can fluctuate above $100.
What Is the Difference Between Face Value and a Bond’s Price?
A bond’s face value is fixed, often issued in $1,000 denominations. By contrast, its price fluctuates in response to market interest rates, time to maturity, and the issuer’s credit rating. A bond may be priced above par, or below par based on these conditions. For example, if interest rates increase, bond prices will decline, trading at a discount to face value in the secondary market.
The Bottom Line
In finance, face value refers to the nominal or dollar value of a security stated by the issuer. This is also known as "par value" or "par," typically in reference to bonds. Face value is not the same as market value which is the current value of the security, based on supply and demand. With bonds, face value refers to the amount paid to the holder of the bond at maturity—although, as with stocks, bond market prices can fluctuate if sold on the secondary market.
Historically, face value was used to ensure that companies didn't sell stocks below a specified price. As a data point in a time of limited information, face value also provided protection to shareholders. For issuers, face value created a value expectation when shares were sold. Finally, face value serves an important role when calculating bond prices. Interest is based on face value making the connection between face value and redemption value much more important face value of a stock.
Defining face value. In the financial industry, face value represents the value, in dollars, of a specific security, such as stocks and bonds, at the time it's issued. Just like the federal government sets the face value, the issuers of stocks and bonds set the value of the securities it offers.
What Is the Difference Between Face Value and Market Value? While face value is the original price of a stock as set by its issuer, market value is influenced by external supply-and-demand forces.
The main differences are: Face Value is the original cost of a stock or bond as stated by the issuer; Book Value is the asset's value in company books, after depreciation; Market Value is the current trading price of the stock or bond in the market. Content: Face Value Meaning.
If the market value is less than the face value, it is selling at a discount or below par. For example, if a share with a face value of Rs 100 is selling for Rs 50, it is at a discount of Rs 50.
In short: Present Value is the value of an expected (as in, you didn't receive it yet) income stream determined as of the date of valuation. Face Value commonly refers to the value that is paid to you at the maturity date.
Face value equals the equity share capital divided by the number of outstanding shares. Market value is calculated by multiplying the current stock price by the number of outstanding shares. Book Value: Book value is a similar stock market terminology closely related to Face Value and Market Value.
In stock investing, the face value is the original value of the stock, as listed on the certificate. This is a value that's assigned to the stock before it is first traded. It can be any amount, but it's often close to zero.
In Mathematics, face value is the actual value of the digit in a number. For example, if 567 is a number, then the face value of 6 is 6 only, whereas its place value is tens (i.e. 60). Thus, for any number, having a two-digit, three-digit or 'n' number of digits, every digit will have a place value and a face value.
Key Takeaways. Face value is equal to the dollar amount the issuer pays to the investor at maturity. As the bond's price fluctuates, the price is described relative to the original par value, or face value; the bond is referred to as trading above par value or below par value.
Face value is the actual value of a digit in a number. To get the place value of a number, we multiply the digit value with its numerical value. For example, in the number 452, the place value of 5 is (5 × 10) = 50, since 5 is in tens place. The face value of a digit is the number itself.
Market value is the price of an asset on the marketplace, based on the prices buyers are willing to pay and what sellers are willing to accept. For publicly traded companies, market value refers to the market capitalization: the number of outstanding shares times the share price.
The face value of any share remains the same from its initial public offering until there is a stock split. However, to an investor, the face value has negligible worth, as it is not required in any kind of financial analysis, or valuation purpose of the company.
Here's a quick guide on the four most common terms: 🔹 Face Value The original value of a security as stated by its issuer. It's typically fixed and used mainly for bonds and common stock issuance. 🔹 Fair Value An estimate of the price at which an asset should trade in a "fair" market.
The major difference between place value and face value is that the place value deals with the position of the digit, and the face value represents the actual value of a digit. The number system is available and is essential for characterising the digits into groups of tens, hundreds and even thousands.
In the financial industry, face value represents the value, in dollars, of a specific security, such as stocks and bonds, at the time it's issued. Just like the federal government sets the face value, the issuers of stocks and bonds set the value of the securities it offers.
Par value is sometimes known as face value, which is the literal meaning of the term. A financial instrument's par value is determined by the institution that issues it. The par values of stocks and bonds were printed on the faces of the shares when they were printed on paper.
Face value represents the nominal value of an asset. For example, the face value of money is set by the federal government and printed directly on it, so it's easy to identify. In the investment industry, face value typically involves the value of securities, such as stocks and bonds.
Answer: Face value is the actual value of the digit whereas place value is the position of a digit in a number. For example, the face value of 5 in 5432 is 5 whereas the place value of 5 is 5000 (five-thousands).
Face value is the dollar value as stated by the issuer of any security when issuing. The nominal value is the fundamental concept of the stock market. This value remains fixed when publicly traded firms offer stocks through the IPOs (Initial Public Offerings).
The most important difference between the face value of a bond and its price is that the face value is fixed, while the price varies due to outside influences. The amount set for face value remains the same until the bond reaches maturity.
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