The par value of a bond is the:

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Study for the MTTC Business Management, Marketing, and Technology (098) Test. Use flashcards and multiple choice questions with detailed explanations for each question. Prepare effectively for your exam!

Multiple Choice

The par value of a bond is the:

Explanation:
Par value is the principal that the issuer promises to repay when the bond matures. It’s the amount the bond is originally issued for and the amount that will be returned at the end, assuming no default. This value is also the basis for calculating the periodic interest payment (the coupon) as a percentage of that par amount. Market price today can differ from par due to interest rate changes and other factors, and the coupon rate is the interest rate applied to the par value, not the amount repaid at maturity. For example, a bond with a par value of 1,000 will pay back 1,000 at maturity, even if it trades for a higher or lower price in the market today.

Par value is the principal that the issuer promises to repay when the bond matures. It’s the amount the bond is originally issued for and the amount that will be returned at the end, assuming no default. This value is also the basis for calculating the periodic interest payment (the coupon) as a percentage of that par amount. Market price today can differ from par due to interest rate changes and other factors, and the coupon rate is the interest rate applied to the par value, not the amount repaid at maturity. For example, a bond with a par value of 1,000 will pay back 1,000 at maturity, even if it trades for a higher or lower price in the market today.

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