What is Face Value?
Face value — in German: Nennwert, also called Nominalwert or Nennbetrag — is the amount printed on a security, banknote, or coin. It determines how much interest a bond pays and what the holder receives at maturity. It rarely matches the current market price.
Face value is the fixed amount stated on a security. For bonds, it sets the coupon payment size and the repayment amount at maturity. For stocks, it represents a notional share of the company's registered capital. Unlike the market price, face value stays constant throughout the security's life.
Face Value in Bonds
When you buy a bond, the face value is the amount the issuer promises to pay back at maturity. It also sets the base for coupon calculations: a €1,000 bond with a 3% coupon pays €30 per year. German federal securities (Bund, Bobl, Schatz) typically trade in units of €100.
Face Value in Stocks
For stocks, face value represents a notional slice of the company's registered capital. German law (§ 8 AktG) requires a minimum of €1 per share. This number has nothing to do with the market price — a stock with a €1 face value can trade at €50 or €500.
Face Value in Currency
For banknotes and coins, face value is simply the printed or minted amount. A €50 note has a face value of €50, regardless of what it cost to produce. Collector coins often have material worth far above their face value, yet they remain legal tender at their stamped amount.
Face Value vs. Market Value
| Aspect | Face Value (Nennwert) | Market Value (Kurswert) |
|---|---|---|
| Definition | Amount printed on the security | Current trading price |
| Set by | Issuer at issuance | Supply and demand |
| Over time | Stays constant | Fluctuates daily |
| Used for | Coupon payments and repayment | Actual buy/sell price |
Practical Example: German Federal Bond
A German federal bond with a face value of €100 and a 2.5% coupon pays €2.50 in interest each year. If the market price is €105, the buyer pays more than the face value — this is called 'above par.' At maturity, the issuer still repays only €100, so the effective yield is lower than the 2.5% coupon. Conversely, buying at €95 ('below par') means the effective yield exceeds the coupon rate.
Frequently Asked Questions
What is face value explained simply?
Face value is the amount printed on a security. For a bond, it is what the investor gets back at maturity. For stocks, it represents a nominal share of the company's registered capital.
What does 'at par' mean?
'At par' means a security's market price equals its face value. 'Above par' means it trades higher, 'below par' means it trades lower.
What is the difference between face value and market value?
Face value is fixed at issuance and never changes. Market value moves daily based on supply, demand, and interest rates. A bond's market value can sit above or below its face value.
What is nominal value?
'Nominal' means 'in name.' A nominal amount is the printed value, not the actual market price. Nominal value and face value (German: Nennwert) are synonyms.
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