Face Amount

Investments

Quick Definition

Face Amount (also called Face Value or Par Value) is the original value of a financial instrument like a bond, share, or insurance policy, stated at the time of issuance.

Detailed Explanation

Face Amount is the value printed on a financial instrument and is used to calculate interest payments, dividends, or maturity value.

For bonds, it is the amount repaid to investors at maturity. For shares, it represents the nominal value assigned during issuance, which may differ from the market price.

Where Face Amount is Used

  • Bonds/Debentures: Basis for interest (coupon) calculation
  • Shares: Nominal value of stock
  • Insurance Policies: Sum assured

Face Value vs Market Value

[Image comparing face value versus market value of a stock showing how market price fluctuates above or below the fixed face value]
  • Face Value: Fixed, set at issuance
  • Market Value: Fluctuates based on demand and supply

Why Face Amount Matters

  • Determines interest payments
  • Helps in valuation of securities
  • Important for financial calculations

Example

"A bond has a face value of ₹1,000 and a coupon rate of 8%. 👉 Annual interest = ₹80"

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