Par value / face value.
In plain English
Par value, also called face value, is the stated amount printed on a bond: what the issuer repays when the bond matures and the figure its coupon interest is based on. Most corporate bonds have a par of 1,000 dollars. A bond's market price moves above par, called a premium, or below it, a discount, as interest rates and credit change, but the par it repays at maturity does not move. So a bond bought at 950 dollars still returns 1,000 dollars at maturity. For stocks, par value is a mostly meaningless legal formality unrelated to market price.
01Why it matters
Par value is the anchor a bond repays and calculates interest on, so understanding it explains why a bond bought at a discount or premium still returns its face amount at maturity.
02The math, step by step
You buy a 1,000 dollar par bond for 950 dollars because rates rose after it was issued. It still pays interest on the 1,000 dollar par and repays the full 1,000 dollars at maturity, giving you a 50 dollar gain on top of the coupons.
03What this is NOT
Par value is NOT the price you pay. The market price moves above or below par with rates and credit, but par is the fixed amount repaid at maturity and used to figure the coupon.
04Receipts
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