What is the Face value?

The face value of a bond, also known as par value or principal, is the amount of money that the issuer of the bond promises to repay to the bondholder at maturity. This value is typically set when the bond is issued and does not change over the life of the bond.

Why is the Face value important?

For investors, the face value represents the amount of money they will receive from the issuer when the bond reaches maturity. It is the amount on which the periodic interest payments, known as coupons, are calculated. The face value is also used to determine the yield to maturity of the bond, which is the total return an investor can expect to receive if the bond is held until maturity.

Understanding the face value of a bond is essential to assess the potential returns and risks associated with investing in bonds.