If you are planning on getting involved in the bond market, you will need to understand what the face value of the bond is and how that impacts you as an investor. Here are the basics of bond face value.

Face Value

Every bond that is issued has a face value associated with it. This is the value that the investor is going to receive whenever they turn in the bond at the end of the bond term. Whenever a new corporate bond is issued, they will be sold at face value in most cases. Whenever you purchase a government savings bonds, you are actually going to pay half of the face value.

Face Value vs. Cost

It is important that you understand that whenever you buy bonds in the secondary market, you are most likely not going to pay face value for them. Bonds fluctuate in price based on changes in interest rates in the market. If interest rates in the market increase, you are going to pay less than the face value of the bond to purchase it. If the interest rates decrease in the market, you may have to pay more than what the face value of the bond is.

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