The bond's face value is known as its par value. For a bond or a fixed-income instrument, par value is critical since it defines its maturity and the dollar value of its coupon payments. " The market price of a bond may be more or lower than par, depending on the level of interest rates and the credit status of the bond in question. Because bonds are often issued in $1,000 or $100 denominations, the bond's par value is typical $1,000 or $100.

The stock value indicated in a company's charter is the par value of a share. The par value of an equity share is typically zero cents or even lower.

In equities, the par value has little to do with the market price of the shares.

Par Value of Bonds

A bond's par value is the most significant factor to consider. The par value is the amount of money bond issuers agree to return to bondholders at the bond's maturity date. To put it simply, an obligation bond is a written commitment from the issuer that the money it borrows will be returned.

A bond's face value is not always the same as its actual worth. Interest rates could be issued at a premium or a discount if they are high. For example, if a bond is trading above its par value, it is trading at an over-par premium. Bonds often trade above or at a premium when interest rates are low or downward. This is the case right now. In times of high-interest rates, more bonds will be sold at a discount.

When a $1,000 bond is presently trading at $1,020, it's considered to be trading at a premium; when another $1,000 bond is currently trading at $950, it's thought to be trading at a discount.

To offset the interest received and reduce the investor's taxable income, an investor who purchases a taxable bond at a price above par might defer the premium payment for the remaining life of the bond. Tax-free bonds purchased at a price above par are not eligible for premium amortization.

The difference between a bond's coupon rate

The overall interest rate in the economy influences whether a bond will trade at, below, or above its par value. In return for lending a specific sum of money to the issuer, bondholders receive annual or semi-annual interest payments, which are referred to as the coupon rate.

For example, a $1,000 bond with a coupon rate of 4% and an annual coupon payment of $40 would have a par value of $1,000. The annual coupon payments on a bond having a par value of $100 and a coupon rate of 4% are $4.

Since both interest and coupon rates are the same, the bond will trade at its par value if a 4 percent coupon bond is issued when interest rates are 4 percent. Because of this, it is possible that interest rates could climb to 5%, and the bond's value could fall below its par value. Bondholders will receive a lower interest rate than those who hold similar-rated bonds, paying out an interest rate of 5% to their bondholders. The price of a lower-coupon bond must therefore fall to provide investors with the same 5% yield. A lower interest rate environment means that bond values will rise and trade above par since a 4 percent coupon rate is more attractive than a lower-than-average interest rate.

At maturity, the issuer will pay the investor the bond's par value, regardless of whether it.

Shareholders' Equity

Shares cannot be sold below the par value specified by some states. Most corporations set a minimum stock par value to comply with state rules. For example, Apple (AAPL) stock has a par value of $0.00001, while Amazon (AMZN) stock has a par value of $0.01.

Investors can be confident that no one is getting favorable pricing treatment if shares cannot be sold below this value at the initial public offering.

No par value stock can be issued in some states.

There is no cap on how much a business may sell these shares. The words "no par value" will be displayed on stock certificates, making it easy for investors to spot no-par investments. The balance sheet's Shareholders' Equity section contains the par value of a company's stock.

What Is the Par Value of a Bond?

Regarding bonds, the par value is a critical factor to consider. To put it another way, a bond is a written commitment from the issuer that the money borrowed will be repaid to the bondholders at the bond's maturity date. The par value also sets the monetary value of coupon payments and defines the maturity value. The most common bond denominations are $1,000 and $100, respectively, which serve as the par value.

The stock value indicated in the corporation's charter is meant by "par value" for a share. A penny per share is a common par value for shares with no other value. The market price of an equity's shares has little bearing on the par value. Shares cannot be sold below the par value specified by some states. Most corporations set a minimum stock par value to comply with state rules. AAPL shares have a par value of $0.00001, for example.