Par Value vs. Face Value: What's the Difference? - Investopedia

Face value is the nominal value or dollar value of a security stated by the issuer, also known as "par value" or simply "par." ... Yield is the return a company ... Bonds FixedIncome TableofContents Expand TableofContents Overview ParValue FaceValue SpecialConsiderations ParValuevs.FaceValue:AnOverview Whenreferringtothevalueoffinancialinstruments,there'snodifferencebetween parvalueandfacevalue.Bothtermsrefertothestatedvalueofthefinancialinstrumentatthetimeitisissued. Parvalueismorecommonlyusedwithbondsthanwithstocks.Withbonds,theparvalueistheamountofmoneythatbondissuersagreetorepaytothepurchaseratthebond'smaturity.Abondisbasicallyawrittenpromisethattheamountloanedtotheissuerwillbepaidback. Intermsofstocks,parvalueisoftensettocomplywithmanystate'sregulationsthatrequirethatstocknotbesoldbelowparvalue.Becauseofthis,mostcompaniessetaparvaluefortheirstocksataminimalamount,suchasAppleInc,,whichhasaparvalueof$0.00001pershare.Notallstatesrequireaparvalue;assuch,notallcompanieswillsetone. KeyTakeaways Theentitythatissuesafinancialinstrumentlikeabondorstockassignsaparvaluetoit.Parvaluereferstothe"facevalue"ofasecurityandthetermsareinterchangeable.Parvalueandfacevaluearemostimportantwithbonds,astheyrepresenthowmuchabondwillbeworthatthetimeofthebond'smaturity.Withstocks,parvalueisamostlyarbitrarynumber,oftenissuedtoavoidanypotentiallegalissuesifthestockdropsbelowitsparvalue. ParValue Bondsaregenerallyissuedwithparvaluesofeither$1,000or$100.Ifaninvestorpurchasesabondwitha$1,000parvalueandamaturitydatesetfiveyearsdowntheroad,thentheissuingentityisrequiredtopaytheinvestor,orbondholder,$1,000afterthefiveyearshaspassed. Thefacevalueofashareofstockisthevaluepershareasstatedintheissuingcompany'scharter.Thisistheminimumvaluethateachshareholderisexpectedtopaypershareofstockinordertofundthebusiness.Thisvalueisusuallyquitelow—nearly$0pershare—toprotectshareholdersfromliabilityintheeventthebusinessisnotabletomeetitsfinancialobligations. FaceValue Facevalueistypicallyanarbitrarynumbersetbytheissuer,whichisusuallyindicatedonthecompany'sbalancesheets. Thefacevalue,whilearbitraryinappearance,isdeterminedbythecompanysothattheycangetrealnumbersforgrowthandprojectedneeds. Forexample,iftheissuerneedstohaveafactory-builtthathasacostof$2million,itmaypricestocksat$1,000andissue2,000ofthemtoraisetheneededfunds.Thevalueofthestocksincreasesastheissuerbeginstoturnquarterlyprofitsandseesreturnsontheinvestmentsgeneratedbyinvestorspurchasingthestocks. SpecialConsiderations Whilethefacevalueorparvalueofthesesecuritiesisimportant,ithaslittlebearingonthepriceaninvestormustpaytopurchaseabondorashareofstock,calledthemarketvalue. Themarketvalueofstocksandbondsisdeterminedbythebuyingandsellingofsecuritiesontheopenmarket.Thesellingpriceofthesesecurities,therefore,isdictatedmorebythepsychologyandcompetingopinionsofinvestorsthanitisbythestatedvalueofthesecurityatissuance.Assuch,themarketvalueofasecurity,particularlyastock,isoffargreaterrelevancethantheparvalueorfacevalue. ArticleSources Investopediarequireswriterstouseprimarysourcestosupporttheirwork.Theseincludewhitepapers,governmentdata,originalreporting,andinterviewswithindustryexperts.Wealsoreferenceoriginalresearchfromotherreputablepublisherswhereappropriate.Youcanlearnmoreaboutthestandardswefollowinproducingaccurate,unbiasedcontentinour editorialpolicy. AppleInc."2019Form10-K,"Exhibit4.1.AccessedApril21,2020. U.S.SecuritiesandExchangeCommission."Bonds,SellingbeforeMaturity."AccessedApril22,2020. CompareAccounts AdvertiserDisclosure × TheoffersthatappearinthistablearefrompartnershipsfromwhichInvestopediareceivescompensation.Thiscompensationmayimpacthowandwherelistingsappear.Investopediadoesnotincludealloffersavailableinthemarketplace. Provider Name Description RelatedArticles FinancialAnalysis ParValuevs.MarketValue:What'stheDifference? FixedIncome Whenisabond'scouponrateandyieldtomaturitythesame? FixedIncome AgencyBonds:LimitedRiskAndHigherReturn Stocks WhyWouldaStockHaveNoParValue? ValueStocks ParValueStockvs.No-ParValueStock:What'stheDifference? Accounting WhatIstheEffectiveInterestMethodofAmortization? PartnerLinks RelatedTerms FaceValueUsesinStocksandBonds Facevalueisthenominalvalueordollarvalueofasecuritystatedbytheissuer,alsoknownas"parvalue"orsimply"par." more UnderstandingWhatYieldInvolves Yieldisthereturnacompanygivesbacktoinvestorsforinvestinginastock,bondorothersecurity. more WhatDoesPulltoParMeaninBonds? Pulltoparisthemovementofabond'spricetowarditsfacevalueasitapproachesitsmaturitydate. more WhatIsaZero-CouponBond? Azero-couponbondisadebtsecuritythatdoesn'tpayinterestbuttradesatadeepdiscount,renderingprofitatmaturitywhenitisredeemed. more ParValueDefinition Parvaluecanrefertoeitherthefacevalueofabondorthestockvaluestatedinthecorporatecharter. more TreasuryBills(T-Bills) ATreasuryBill(T-Bill)isashort-termdebtobligationissuedbytheU.S.TreasuryandbackedbytheU.S.governmentwithamaturityoflessthanoneyear. more