Par Value
Par value is the face or nominal value of a bond, share or coupon as stated on the certificate. For bonds it is the amount repaid at maturity — often $1,000 — and the base for coupon payments; for shares it is usually a tiny legal figure.
A bond that says "$1,000" on it may trade at $950 or $1,080, but at maturity the issuer repays the $1,000. That stated amount is par value. Understanding par helps you read bond prices, calculate coupons and see whether a bond trades at a premium or a discount. This entry explains par for bonds and stocks, with examples.
- Category
- Bonds and Interest Rates
- Reading time
- 3 min
- Also called
- Face value, Nominal value, Par
- Updated
Par value in plain words
Par value is the nominal or face value of a bond, share or coupon as shown on the certificate.1
When a bond matures, the issuer repays the principal, also called its face value or par value.2
Coupon interest is calculated on par, not on the market price. See Coupon Rate.
How par value works for bonds, step by step
Bond is issued
Usually near par, e.g. $1,000.
Coupons are paid
Coupon rate × par. See Coupon Rate.
Price moves
With interest rates. See Interest Rate.
Above par = premium
When rates fall.
Below par = discount
When rates rise.
Par is repaid
At maturity. See Yield to Maturity.
Worked examples
Example 1 — Coupon on par
Discount bondA $1,000 par bond pays a 5% coupon. It trades at $960.
| Annual coupon | $1,000 × 5% = $50 |
| Current yield | $50 ÷ $960 ≈ 5.21% |
Coupons are based on par, so buying below par raises the effective yield. See Current Yield.
Example 2 — Pull to par
+$40You buy the bond at $960 and hold to maturity.
| Repaid | $1,000 |
| Capital gain | $40 |
At maturity the issuer repays face value regardless of what you paid.2
Example 3 — Stock par value
Nominal onlyA company issues shares with $0.01 par value and sells them for $20.
| Par | $0.01 |
| Market price | $20 |
For shares, par is a nominal legal figure unrelated to market value.1
Par vs market price (bonds)
| Aspect | Price vs par | Typical reason |
|---|---|---|
| Above par (premium) | Price > $1,000 | Coupon above market rates |
| At par | Price = $1,000 | Coupon equals market rate |
| Below par (discount) | Price < $1,000 | Coupon below market rates |
| At maturity | Repaid at par | See Zero-Coupon Bond |
Where par value matters
Coupon calculations
Interest on face value.
Bond pricing
Quotes as % of par. See Bond.
Yield maths
Gain or loss to par. See Yield to Maturity.
Preferred stock
Dividends based on par. See Preferred Stock.
Advantages and disadvantages
Advantages
- Fixed reference for coupons.
- Known repayment at maturity.
- Simple bond quoting.
Disadvantages
- Says little about market value.
- Stock par is mostly irrelevant.
- Inflation erodes par's real value.
Going deeper
Read as far as you need. Each level builds on the one before it.
Quoting as % of par
Beginner
Bond prices are often quoted as a percentage of par: 98.5 means $985 for a $1,000 bond. See Bond.
Shares vs bonds
Intermediate
Par value applies to bonds, shares and coupons, but only for bonds does it set the repayment amount.1
Zero-coupon bonds
Advanced
Zero-coupon bonds pay no interest and are sold well below par; the gain to par is the investor's return. See Zero-Coupon Bond.
Common mistakes
Confusing par with price
Market price can differ widely.
Calculating coupons on price
Use par.
Overvaluing stock par
It's a legal formality.
Ignoring premium decay
Premium bonds lose value toward par.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- Par value is the face value of a security.
- Bonds repay par at maturity.
- Coupons are calculated on par.
- Bonds can trade above or below par.
- Stock par is mostly nominal.
Frequently asked questions
Is par value the same as face value?
Why do bonds trade above par?
Does stock par value matter to investors?
Further learning
- Coupon Rate
Interest based on par.
- Yield to Maturity
Return including pull to par.
- Zero-Coupon Bond
Deep discount to par.
- Accrued Interest
Another bond pricing detail.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- Corporate Finance Institute. Par Value (opens in a new tab) Checked .
- Investor.gov (SEC). Bonds – FAQs (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.