Face value, in finance, refers to the nominal or dollar value of a security as specified by the issuer. The face value represents the original cost or nominal value of the security, as indicated on the certificate or document. In the context of stocks, it represents the initial cost at which the stock was issued and is printed on the stock certificate.
For bonds, the face value is the amount that the bondholder will receive at maturity, typically in denominations of $1,000. This face value for bonds is commonly referred to as “par value” or simply “par.” It signifies the bond’s principal amount, and it’s the amount the issuer agrees to repay to the bondholder when the bond matures, in addition to any periodic interest payments. Face value is a crucial reference point for both stocks and bonds, although the market price of these securities may differ significantly from their face value based on supply and demand dynamics and prevailing market conditions.