Par Value: The Reference Principal Amount of a Bond or Other Security

Par value is the reference principal amount assigned to a bond or similar security. For most plain bonds, it is the amount repaid to investors at maturity and the base used to calculate coupon payments.

In bond markets, par value is often the same idea as face value.

This page now also replaces the older par-value guide, so the bond and stock framing lives in one canonical security-valuation page.

Why Par Value Matters

Par value matters because it anchors several basic bond concepts:

• coupon rate
• coupon payment
• repayment at maturity date
• whether a bond trades at a premium, par, or discount

Par Value and Coupon Payments

The coupon payment is usually calculated from par value:

If a bond has:

• par value = $1,000
• coupon rate = 5%

then the annual coupon payment is typically $50.

Par Value vs. Market Price

Par value is not the same as market price.

• par value is the reference amount in the bond contract
• market price is what investors are willing to pay today

A bond can trade:

• above par at a premium
• near par
• below par at a discount

The market price changes as interest rates, credit conditions, and time to maturity change. Par value usually does not.

Why Bonds Move Toward Par

As a plain fixed-rate bond approaches maturity, its price tends to move toward par value, assuming no default. That is because the amount to be repaid at maturity becomes more certain and closer in time.

Par Value in Stocks

Stocks can also have a nominal par value in legal or accounting terms, but in modern investing that number is usually far less economically important than it is for bonds.

For fixed-income investors, par value is far more central.

Related Terms

• Face Value (Par Value): A closely related term often used interchangeably with par value.
• Coupon Rate: Usually applied to par value to determine coupon cash flows.
• Coupon Payment: The cash amount derived from coupon rate and par.
• Maturity Date: The date when par is typically repaid.
• Bond Yield: Helps explain why a bond may trade above or below par.

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