Face value
The amount repaid at maturity, and the figure the coupon rate is applied to. Almost never the price actually paid.
Where you will meet it
Face value appears in 9 learning outcomes on the CFA syllabus. A few of them:
- Set out the core characteristics of a debt security
“A bond's basic features are its issuer, maturity, par value, coupon rate and frequency, and currency of denomination.”
- Work out, from market prices, the return implied by a bond and the growth rate implied by a stock
“For a zero-coupon bond, r is (face value / price) raised to the power 1/n, minus 1.”
- Value perpetual preferred stock that pays a fixed rate and cannot be called
“The dividend is usually quoted as a percentage of par, so a 6% preferred with a par value of 50 pays 3 a year.”
- Set out the key characteristics of a convertible bond
“The conversion price is the face value divided by the conversion ratio.”
Learn it properly
Practise it
Practise face value until it is automatic: questions that explain every wrong option.
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