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What Is Face Value
What is Face Value?
All the financial transactions in the market are done through the various forms of money. The money is circulated in the market in various forms like coins, notes, stamps etc. Each entity represents a certain amount of value in terms of the currency of the particular economy. This value, as indicated on the face of the coin, notes or stamps is called the face value of that entity. This is printed on the currency as decided by the minting authority. It is also known as true value. Thus true value determines the amount of money or value that the entity holds. However in some cases the true value is mostly symbolic and may not be the same as indicated.
The face value is a widely used term in stock markets and banking sectors. Its value of stock certificates represents the par value of the stock. The par value is the value of the share when it was initially offered to the share holders. The market value of a share may fluctuate depending upon the interest rates and market conditions whereas the face value is an initially assigned value in the records of the issuing authority which remains constant as long as the share exists. Usually for a share is set to C$1.
In case of bonds, it represents the principal or redemption values of the bonds i.e. the price at which the issuing company may choose to repurchase a security before its maturity date. In this case the actual value of the bond may be less than or more than the true value but becomes nearly equal as it reaches its maturity. If the value of a bond reaches below the true value then it is sold in the secondary market at a discounted rate and thus sold “below par” whereas if it reaches a value higher than the true value then it is sold above par.
In case of Life Insurance policies, the true value is the death benefit. A double indemnity offers an amount two times the true value as the death benefit. In case of properties the true value is the amount stated on the policy declaration page. In this case it is the maximum amount payable. Other than these, the true value is used in tickets of sporting events, movies, concert etc. The true value in such cases is as per the laws stated in their jurisdiction. The reselling of such tickets on a price higher than the true value is thus considered illegal. The true value is a kind of security value that is set by the issuing authority and is thus irrespective of the value of the share in the market or even the interest rates.
Thus the face value in all the cases is a permanent value assigned to a given legal document such that there is no discrimination on the value of the same type document when it is distributed among different holders.
All the financial transactions in the market are done through the various forms of money. The money is circulated in the market in various forms like coins, notes, stamps etc. Each entity represents a certain amount of value in terms of the currency of the particular economy. This value, as indicated on the face of the coin, notes or stamps is called the face value of that entity. This is printed on the currency as decided by the minting authority. It is also known as true value. Thus true value determines the amount of money or value that the entity holds. However in some cases the true value is mostly symbolic and may not be the same as indicated.
The face value is a widely used term in stock markets and banking sectors. Its value of stock certificates represents the par value of the stock. The par value is the value of the share when it was initially offered to the share holders. The market value of a share may fluctuate depending upon the interest rates and market conditions whereas the face value is an initially assigned value in the records of the issuing authority which remains constant as long as the share exists. Usually for a share is set to C$1.
In case of bonds, it represents the principal or redemption values of the bonds i.e. the price at which the issuing company may choose to repurchase a security before its maturity date. In this case the actual value of the bond may be less than or more than the true value but becomes nearly equal as it reaches its maturity. If the value of a bond reaches below the true value then it is sold in the secondary market at a discounted rate and thus sold “below par” whereas if it reaches a value higher than the true value then it is sold above par.
In case of Life Insurance policies, the true value is the death benefit. A double indemnity offers an amount two times the true value as the death benefit. In case of properties the true value is the amount stated on the policy declaration page. In this case it is the maximum amount payable. Other than these, the true value is used in tickets of sporting events, movies, concert etc. The true value in such cases is as per the laws stated in their jurisdiction. The reselling of such tickets on a price higher than the true value is thus considered illegal. The true value is a kind of security value that is set by the issuing authority and is thus irrespective of the value of the share in the market or even the interest rates.
Thus the face value in all the cases is a permanent value assigned to a given legal document such that there is no discrimination on the value of the same type document when it is distributed among different holders.
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Category
investing
