Par Value

Par value is the face amount of a bond — the fixed principal the issuer promises to repay at maturity, and the base its coupon rate is applied to.

Published by Quintessentia Network Inc. · Updated 17 July 2026 · Sources & disclosures

Part of the Bonds, Rates & the Economy course · Lesson 1 of 12

Formula

Annual coupon = Par × Coupon rate; Dollar price = Par × (Quoted price ÷ 100)

What it is

Par value (also called face value) is the fixed principal sum a bond issuer promises to repay on the maturity date. It is set when the bond is issued and written into the bond's terms; it does not move with the bond's market price. Par also anchors the interest: a coupon rate is a percentage of par, not of the price a buyer actually paid. Bond prices are quoted as a percentage of par, so a quote of 100 means the bond is trading at par, a quote above 100 is a premium, and below 100 is a discount. In North American markets a corporate bond is commonly issued with a par amount of $1,000 per bond, though the denomination varies by issue and by market.

Why it matters

Par is the reference point that makes the rest of a bond make sense. Because the coupon is applied to par rather than to the price a buyer paid, the dollars of interest never change when the bond's price moves — so buying that fixed stream below par gives a yield above the stated coupon rate, and buying it above par gives a yield below the coupon rate. Price and yield move inversely around that anchor: when market yields on comparable bonds rise above a bond's fixed coupon rate, its price falls below par; when market yields fall below the coupon, the price rises above par. Par is also the amount the maturity repayment is measured against, so the gap between today's price and par is part of what a bondholder is compensated for — conditional on the issuer actually paying as promised.

How it's calculated

Par value is not calculated. It is set by the issuer at issuance and stated in the prospectus or trust indenture, alongside the coupon rate and maturity date. What is derived from it: the periodic coupon payment (coupon rate times par, divided by the number of payments per year) and the dollar price, since bonds are quoted as a percentage of par rather than in dollars — a quote of 98.5 on a $1,000 par bond is a dollar price of $985. One exception: inflation-linked government bonds index the principal itself to a consumer price index. US TIPS repay the greater of the inflation-adjusted principal or the original par at maturity; Canadian Real Return Bonds index principal to the all-items CPI.

Cross-border note. For bonds, par means the same thing in Canada and the US. The word diverges for stocks: under the Canada Business Corporations Act shares must be issued without nominal or par value, so Canadian share certificates carry no par figure at all, while US corporations (Delaware in particular) commonly assign a token par value such as $0.01, used for charter and franchise-tax mechanics rather than for valuation.

FAQ

Does a bondholder always get par value back at maturity?

No. Par is what the issuer promises to repay, not a guarantee. If the issuer defaults or restructures, less than par may come back. Many bonds are also callable, meaning the issuer can redeem them early at a price set in the terms. And selling before maturity fetches the market price that day, which can be above or below par.

Why would a bond trade above or below its par value?

Because price and yield move inversely. A bond's coupon is fixed at issuance. If market yields on comparable bonds rise above that coupon rate, buyers will only pay less than par (a discount), which lifts the bond's yield toward what comparable bonds offer. If market yields fall below the coupon, the bond trades above par (a premium), which pushes its yield down. Par itself never changes.

Is a bond's par value the same idea as a stock's par value?

No — same words, different meanings. A bond's par is real principal that is scheduled to be repaid. A stock's par value is a nominal legal and accounting figure, often a fraction of a cent, that has no relationship to the share's market price, book value, or what a shareholder would ever receive.

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