Face value

Face value is the amount of a debt obligation that is stated as payable in a debt document. The face value does not include any of the interest or dividend payments that may later be paid over the term of the debt instrument. Face value may differ from the amount paid for a debt instrument, since the amount paid may incorporate a discount or premium from the face value. On the maturity date of the debt instrument, its issuer will redeem it for the face amount.

A common application of the term is in regard to the face value of a bond. This is the amount payable, as stated on the bond certificate. A typical bond face value is $1,000. The face value of a bond may also be known as its par value.

Face value can also apply to preferred stock, where the amount stated on a stock certificate is used to calculate the percentage dividend paid to investors. For example, a $1,000 face value on a preferred stock certificate, when combined with a 7% dividend payment, means that $70 will be paid each year in dividends.

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