Tuesday, January 4, 2011

Par Value

Par value refers to the face value of a security, for example in the case of a bond the par value is the initial issue price e.g. $1000. A bond may trade above or below its par value depending on where market interest rates are in relation to the coupon rate on the bond. Shares also have a par value but this is more for accounting treatment, however preference shares typically have a par value which may be used in determining their claim on the equity of the company as well as calculation of dividend payments.

Synonyms: Face value, Par, Issue price

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