Par value
The sum the issuer repays at maturity, per unit of the bond. Also called face value or principal. It is the base on which the coupon percentage is calculated.
Example
A bond with a par value of 1,000 and a 4% coupon pays 40 a year regardless of what the bond currently trades for.
Important
Par is not what you pay. A bond bought below par returns more than the purchase price at maturity and one bought above par returns less, and that difference is part of the return in both cases.
Related terms
- Bond — A loan made to a government, agency or company, packaged so it can be transferred to somebody else. It obliges the issuer to pay stated interest on stated dates and to repay a stated sum at maturity.
- Coupon — The periodic interest a bond pays, quoted as a percentage of par value rather than of the price. It is fixed by the contract at issue and does not change with the market.
- Maturity — The date on which a bond repays its par value and the contract ends. Bonds are commonly grouped as short, intermediate or long by how far away that date is.
- Current yield — The annual coupon divided by the current price. It measures the income received against what the bond costs today, and nothing else.
Lessons that explain it
All 578 terms in the Investing glossary