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Simple English definitions for legal terms
Par value
Read a random definition: de parco fracto
A quick definition of Par value:
Par value is the value of a bond or stock that is written on the certificate. It's like the price tag on a toy. The par value of a bond is important because it affects how much money you get back when the bond matures and how much you get paid in interest. Most bonds have a par value of $1,000 or $100.
A more thorough explanation:
Par value, also known as nominal value, is the stated face value of a bond or stock. It is the value that is printed on the bond or stock certificate and is usually set by the company issuing the security.
The par value of a bond is important because it determines the maturity value and the amount of coupon payments. For example, if a bond has a par value of $1,000 and a coupon rate of 5%, the bondholder will receive $50 in interest payments each year until the bond matures.
Similarly, the par value of a stock is important because it determines the minimum price at which the stock can be sold. For example, if a company issues 1,000 shares of stock with a par value of $1, the total par value of the stock is $1,000. If an investor wants to buy one share of the stock, they cannot pay less than $1 for it.
Overall, par value is an important concept in finance because it helps investors understand the value of the securities they are buying and selling.