Face Value

This term usually refers to the nominal dollar value of a bond at its issuance. If a company doesn’t default, the face value will be paid in full to the bondholder when the bond matures.

However, a bond may trade above or below its face value depending on interest rates and whether or not its credit rating has changed much since its issuance. If interest rates rise above the bond’s coupon rate, the bond may trade under its face value and vice versa. A zero coupon bond trades below its face value since it does not pay interest, and a bondholder is paid the face value when the bond matures instead.

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