Legal Definitions - Par value

Par value, also known as nominal value, is the stated face value of a bond or stock. It is the value that is printed on the bond or stock certificate and is usually set by the company issuing the security.

The par value of a bond is important because it determines the maturity value and the amount of coupon payments. For example, if a bond has a par value of $1,000 and a coupon rate of 5%, the bondholder will receive $50 in interest payments each year until the bond matures.

Similarly, the par value of a stock is important because it determines the minimum price at which the stock can be sold. For example, if a company issues 1,000 shares of stock with a par value of $1, the total par value of the stock is $1,000. If an investor wants to buy one share of the stock, they cannot pay less than $1 for it.

Overall, par value is an important concept in finance because it helps investors understand the value of the securities they are buying and selling.