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What is Face Value?
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.
The face value of bonds usually represents the principal or redemption value. Interest payments are expressed as a percentage of face value. Before maturity, the actual value of a bond may be greater or less than face value, depending on the interest rate payable and the perceived risk of default. As bonds approach maturity, actual value approaches face value.
In the case of stock certificates, face value is the par value of the stock. In the case of common stock, par value is largely symbolic. In the case of preferred stock, dividends may be expressed as a percentage of par value.
The face value of a life insurance policy is the death benefit. In the case of so-called "double indemnity" life insurance policies, the beneficiary receives double the face value in case of accidental death.
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.
The face value of bonds usually represents the principal or redemption value. Interest payments are expressed as a percentage of face value. Before maturity, the actual value of a bond may be greater or less than face value, depending on the interest rate payable and the perceived risk of default. As bonds approach maturity, actual value approaches face value.
In the case of stock certificates, face value is the par value of the stock. In the case of common stock, par value is largely symbolic. In the case of preferred stock, dividends may be expressed as a percentage of par value.
The face value of a life insurance policy is the death benefit. In the case of so-called "double indemnity" life insurance policies, the beneficiary receives double the face value in case of accidental death.