What is Par Value of a Bond?

//What is Par Value of a Bond?
What is Par Value of a Bond? 2017-10-09T04:40:34+00:00

Definition: The par value of a bond also called the face amount or face value is the value written on the front of the bond. This is the amount of money that bond issuers promise to be repaid bondholders at a future date. For instance, a company might issue $500, 15-year bonds to the public. The par value of these bonds is $500. In other words, the company promises to pay the public back $500 15 years from the bond issuance.

What Does Par Value Bond Mean?

Many companies that need financing but don’t want to give up ownership shares turn to bonds to help finance new operations. Bonds are a written promise to pay a specific amount. Essentially, a bond is a loan made from the bondholder to the bond issuer. Bonds are also used bond organizations that can’t issue stock or receive bank loans like governments, states, and school districts. Each bond issued at its par value.

Example

Bonds are not always issued at their par value. Some bonds are issued at a discount (lower than par value) and some bonds are issued at a premium (higher than par value). The issue price does not affect the par value. The par value always remains the same and equals the amount of money that the bond issuer must pay the bondholder when the bond matures.

All bonds include interest payments in their terms. Some bonds, like discounted bonds, have implied interest payments, where as, bonds issued at a premium usually require the semi-annual interest payments by the bond issuer.