The nominal dollar amount assigned to a security by the issuer. For an
equity security, face value is usually a very small amount that bears no relationship to its market price, except for
preferred stock, in which case face value is used to calculate
dividend payments. For a
debt security, face value is the amount repaid to the
investor when the bond matures (usually, corporate bonds have a face value of $1000,
municipal bonds $5000, and federal bonds $10,000). In the secondary market, a bond's price fluctuates with
interest rates. If interest rates are higher than the coupon rate on a bond, the bond will be sold below face value (at a "
discount"). If interest rates have fallen, the price will be sold above face value. Also called par or par value.