What is Face Value in Share Market? Definition and Its Importance

In finance, face value refers to the nominal or dollar value of a security stated by the issuer. This is also known as “par value” or “par,” typically about bonds. Face value differs from market value, which is the security price based on supply and demand. With bonds, face value refers to the amount paid to the bondholder at maturity—although, as with stocks, bond market prices can fluctuate if sold on the secondary market.

In simple terms, the face value of a share is its accounting value which could be Re 1, Rs 2, Rs 5, Rs 10 etc. A rider (also called an endorsement) is additional coverage that can be added to a life insurance policy. Some riders allow policyholders to tap into the policy’s face value while they’re living. If you have a term life insurance policy, its face value is what your beneficiaries will inherit upon your death. The benefit amount generally does not change from the amount you decided on when you purchased the policy. Unlike permanent life insurance, term policies do not have a cash value.

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Other names that refer to bond face value include par or par value. Face value refers to the dollar value of a financial instrument when it is issued. For example, when a company goes public, the face value of a share might be Rs.1, and it might be worth Rs.50 on the market. For example, a company’s face value may be higher than its market value if it has penny stocks. So, in this case, the market price might be Rs 0.5, and the face value might be Rs.10. Common stocks allow investors to have a claim on the company’s assets and profits.

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• The face value of a bond guarantees a return, but the face value of a stock may not be an excellent way to figure out what it’s worth.
• The reason is, a 5% coupon rate is attractive in comparison to a 3% coupon rate.
• For example, the face value of Apple shares is $0.00001, while the market value of each of its shares at the close of trading on June 10, 2024, was $193.12.
• To sum it up, the cash value of a permanent policy will not add to its face value, but can be useful in other ways.
• The principles of demand and supply determine the market value.

However, interest rate fluctuation can cause the bond prices being sold in the secondary market to change. For instance, if the bond’s coupon rate is lower than the interest rate, the bond is sold at a discount (below par). In conclusion, face value is a fundamental concept in finance that represents the nominal value of a financial instrument as stated on the instrument itself. It serves as a critical component in financial contracts, providing clarity, transparency, and legal basis for repayment obligations. In bond investing, face value (par value) is the amount paid to a bondholder at the maturity date, as long as the bond issuer doesn’t default.

As such, the price of a low coupon bond will not offer you a 6% yield. If you get a coupon bond at 4% and an interest rate of 4%, the bond will trade at face value since the coupon rate and interest rate are equal. However, the market value of a share depends on its demand and supply in the stock market based on company performance. Cash value accumulates slowly as you pay your premiums but does not increase your death benefit or, thus, the face value of the policy.

In essence, Face Value, Market Value, and Book Value are essential financial concepts. Face Value signifies the nominal worth of security, Market Value denotes its current trading price, and Book Value reveals a company’s net value. Grasping these distinctions empowers investors and financial experts to make well-informed decisions within the ever-evolving financial domain. When a company decides to raise capital from the market, they do so via selling their shares to general investors. This gives the investors the opportunity to earn money via dividends from the company’s profit.

The face value of a stock or bond does not equal its actual market value. Market value is determined based on principles of supply and demand, which are governed by the dollar figure where investors are willing to buy and sell the security at a given time. Depending on market conditions, the face value and market value may have very little correlation. In addition to this, face-value also plays a very important role in corporate action. These include corporate actions like dividends, stock splits, reverse stock splits, etc.

In most cases, any cash value that is left in your permanent insurance policy on your passing will be absorbed by the insurer. That way, if you’re diagnosed with a terminal illness, you can use some of your death benefit for medical care while you’re alive. But any money you use will be subtracted from the policy’s face value, reducing the death benefit your loved ones receive when you pass away. Whole life insurance combines life insurance with an investment component. Face Value is like the sticker price on a car – it’s the value of a stock as listed by the company. As elaborated in the table below, face Value and Market Value have significant differences in the stock market.

What Is the Difference Between Face Value and a Bond’s Price?

Search Stocks Industry-wise, Export Data For Offline Analysis, Customizable Filters. Another very important point to note is the difference between the face value and the market value of a share. These two have no relation and do not affect each other except in some special circumstances.

Understanding the face value of shares could help you get a clearer picture on how the company could perform in the future. Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes. After finding a broker and you agree on the trade, you should ensure that you will not pay a hefty markup. Even though ‘excessive’ is relative, you shouldn’t incur a cost that exceeds three months of interest.

Many of the songs’ arrangements were done by Collins and session arranger Thomas «Tom Tom 84» Washington. Let us suppose that after few months, investor X sells this share to investor Y at INR 15. Now, the investor Y has actually spent INR 15, but the amount invested in the company is still INR 10. Instead, this INR 5 is the profit that investor X has earned through trading. For example, the Currency notes, coins, stamps etc. in a country usually trade At Par in the economy (unless they what is face value are rare or collectibles). Whereas other instruments like bonds, stocks etc. could trade at a price that is very different from the Par Value.