Face Value

Investment Dictionary -> Face Value

Face value typically refers to the value of a coin, bill, bullion coin, or stamp as printed on its face by the minting authorities of the particular country. In some instances, the face value is largely symbolic. On the other hand, it may also refer to the nominal value of security as specified by the issuing body. The face value of stocks is their original cost as indicated on the certificate. The stated or par value of common stock is most often symbolic. In view of bonds, face value stands for the amount that should be paid to the bond holder at maturity date. It should be noted that before maturity, the value of the bond may be greater or smaller than the face value. This depends on the interest rate to be paid and on the potential risk of default. The value of bonds which are sold on the secondary market typically fluctuates with the change in the interest rate. If the interest rate exceeds the coupon value of the bond, than the latter will be sold at a discount. When the coupon rate surpasses the interest rate, the bond will be sold at a premium. In contrast, the actual and the face value match at maturity.

There are other examples of assets with face value. For instance, the death benefit stands for the face value of life insurance policies. The insurance company is obliged to pay a stated double amount of the face value in the event of accidental death. This term excludes death caused by natural causes as well as acts of homicide or suicide. This policy is referred to as double indemnity. In addition, the face value of property insurances and health insurance policies equals the maximum amount to be paid. Finally, face value also refers to the price of tickets for sports, music, or other events and initiatives, as printed on their face.

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