Bond Face Value – What it is and How it WorksOctober 17th, 2012
by David Waring Face Value is the amount that you will be paid
when the bond matures, assuming that the bond does not default.
It is called face value because back when paper bond
certificates were issued, it was the amount printed on the
“face” meaning front of the bond certificate. If you buy a bond
when it is originally issued, you normally pay the face value
for the bond as well, however there are a few exceptions like
zero coupon bonds. Face value is $1000 for most bonds, with the
exception of T-Bills and Savings Bonds. The face value of a bond
matters not only because its how much you receive when the bond
matures, but also because its how your coupon interest payment
is calculated. If a bond has a face value of $1000 and a coupon
interest rate of 6%, then you receive $60 per year from the
bond. After a bond is issued, its value fluctuates along with
interest rates and other factors. This means that while the
amount you receive back at matu