Define: Face Value

UK Accounting Glossary

Definition: Face Value



Advertisement



Full Definition of Face Value


Face value is the nominal, or stated, amount of security. The face value of a bond is the amount the issuer agrees to pay upon maturity. Face value is also the amount upon which interest payments are determined. For example, a bond with a face value of $1,000 and an interest rate of 6% will pay $60 in interest a year (or, more typically, $30 semi-annually). Importantly, face value is not usually the actual value (i.e. price) of a bond. For example, assume a 30-year bond with a face value of $1,000 and an interest rate of 6%; the interest rate for bonds of similar safety and maturity is currently 10%. In that case, the actual value of the 6% bond would be below the face value, because investors could invest their money in 10% bonds with a face value of $1,000 and earn $100 a year instead of $60. Conversely, if interest rates fell to 2%, the actual value of the 6% bonds would be above face value, because investors would need to buy 2% bonds with a face value of $3,000 to earn the same $60.


Advertisement




Cite Term


To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
https://payrollheaven.com/define/face-value/
Modern Language Association (MLA):
Face Value. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. April 02, 2020 https://payrollheaven.com/define/face-value/.
Chicago Manual of Style (CMS):
Face Value. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/face-value/ (accessed: April 02, 2020).
American Psychological Association (APA):
Face Value. PayrollHeaven.com. Retrieved April 02, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/face-value/

Definition Sources


Definitions for Face Value are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February 2020.