Face value could also be referred to as face amount or par value.
Example of Face Value
A bond with a #100,000 face value will be redeemed for #100,000 once it reaches maturity.
A stock with a face value of #100 indicates that the issuer values each share at #100.
Why is it called Face Value?
The phrase “Face Value” serves to differentiate between the initial worth and the market value, which might vary depending on supply and demand. The value that is “printed on the face” of the financial instrument, also known as the value that is written or expressed thereon, is referred to as the “face value.”
Face Value of Shares
A stock’s face value, sometimes referred to as par value or nominal value, is a monetary value set by the firm that issued it. It is a historical artefact with little practical application in the stock market of today.
Face Value of Bonds
A bond’s face value is the sum that it will be worth when it matures. It is typically written on the bond certificate and represents the price at which the issuer will redeem the bond. The face value is used to calculate the interest payment, which is often expressed as a percentage of the face value and is typically expressed as a fixed rate. This is also used to determine the value of a bond in the secondary market.
Is Face Value the same as Market Value?
No, the market value and face value are not the same. In contrast to market value, which is the current worth of the instrument as decided by supply and demand in the market, face value is the nominal or initial value of a financial instrument as stated by the issuer.
Face Value vs Cash Value
Face value is the original value assigned to a financial instrument by the issuer, while cash value is the actual amount of money that a financial instrument is worth at a given time. Cash Value in a financial market is the current market value, taking into account variables including interest rates, market circumstances, and any existing liabilities or debts.
Face Value vs Book Value
Face value is the nominal or initial value that the issuer has declared for a financial instrument, such as a bond, stock, or piece of cash while Book Value is the worth of an asset as it appears on a company’s balance sheet. It is determined by subtracting any accrued depreciation, amortization, or impairment charges from the asset’s cost.
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