Par value, also known as face value or nominal value, is the value at which securities including stocks or bonds are accounted for in their issuer’s books or issued to the public. For example, if a company issues a bond with a par value of $1,000, it means that the bond purchaser will get $1,000 when the bond matures. Similarly, in the context of stock, par value is the value at which each share will be accounted for or issued by the company and wouldn’t typically match the market value of shares. It’s a static amount that does not change, unlike market value that is driven by supply demand dynamics in the stock market.
Related Questions
1. Does par value change over time?
No, par value does not change over time. It is a fixed amount set at the time of issuance of bonds or stocks by the company.
2. Does par value affect stock price?
Want More Financial Tips?
Par value does not typically influence market price of a stock. Stock price is determined by things like the company’s profitability, sector trends, economic factors, and supply and demand among investors.
3. What is the significance of par value?
Par value is significant as it is the face value of bonds or shares as listed in the issuer’s books, and forms the basis for legal capital of a company. However, with stocks, its importance has been diminishing over the years.
4. What happens if a bond is sold below its par value?
If a bond is sold below its par value, it’s said to be sold at a discount. This often happens when the market interest rate is higher than the bond’s coupon rate. Upon maturity, the bondholder still receives the bond’s par value.
5. If a company issues no-par value stock, what does it mean?
No-par value stock is stock that is issued without a par value. The value of no-par value stock is determined by the amount that the investor is willing to pay in the market.