Face value

Definition: The dollar amount a company or government borrows when it issues an investor a bond. This amount, which is printed clearly on the bond, is owed back to the investor on the bond’s maturity date, which also printed on the bond.

Example: On June 1, 2009, Microsoft offered a 5.2%, 30-year bond with an assumed face value of $1,000. It borrowed a total of $750 million by issuing these bonds.

Investeach explains: The face value of a bond is usually $1,000. This means that anyone not having $1,000 lying around can’t be an investor in a normal corporate or government bond. While this seems like a significant sum of money, as time passes and prices and incomes go up, $1,000 becomes less and less significant. Consider that in the above example, Microsoft would have to issue $750 million / $1,000, or 750,000 individual bonds to borrow all the money it wanted. That’s a lot of bonds! To cut down on the number of bonds it has to issue, especially if it believes the interested investors for its bonds have a lot of money, it could have set the face value at $5,000 or even $10,000.

Also known as: Par value, Principal value

Riddle me this:

1. What is the normal face value for a bond?
2. When will the bond investor receive this amount back?
3. How frequently does the face value change over the life of the bond?
4. What can a company do in order to lessen the number of individual bonds it has to issue?