ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is a Bond’s Par Value? A bond is essentially a written promise that the amount loaned to the issuer will be repaid. The par value is the amount of money that the issuer promises to repay bondholders at the maturity date of the bond. The par value also determines the dollar value of coupon payments.

Detailed explanation-2: -If, when a company issues a new bond, it receives the face value of the security, the bond is said to have been issued at par. If the issuer receives less than the face value for the security, it is issued at a discount. If the issuer receives more than the face value for the security, it is issued at a premium.

Detailed explanation-3: -A bond’s term to maturity is the period during which its owner will receive interest payments on the investment. When the bond reaches maturity, the owner is repaid its par, or face, value.

Detailed explanation-4: -The face value is the bond’s principal or par value. It is repaid at maturity. The term “face value” is a remnant of the times when companies used to issue paper bond certificates, and the par value was printed on the face of these certificates.

Detailed explanation-5: -At maturity, the issuing entity must pay the bondholder the par value of the bond, regardless of its current market value. This means that if an investor purchases a five-year $1, 000 bond for $800, they collect $1, 000 at the end of five years in addition to any coupon payments they received during that time.