# Bond Price vs Face Value: Difference and Comparison

To raise funds, governments and corporate companies use the concept of bonds. Face value is the value of the bond when it matures. Face value, or par value, is used to calculate the interests.

## Key Takeaways

1. The face value of a bond is the amount the bond will be worth at maturity, while the bond price is the bond’s current market value.
2. The bond price can be higher or lower than the face value, depending on interest rates, creditworthiness, and market demand.
3. Investors can buy bonds at their face value or a premium or discount to the face value, and the bond price will fluctuate over time.

## Bond Price vs Face Value

Bond price refers to the amount an investor pays to purchase a bond. It can fluctuate based on the bond issuer’s interest rate and credit rating. Face value refers to the amount a bond will be worth when it matures, also known as the “par value.” It is the amount the bond issuer promises to pay the bondholder at maturity.

Bond price is the bond’s current worth or value computed by discounting the value of future cash flow. The price of a bond varies inversely with the change in interest rate.

The bond issuer sometimes may be unable to repay the loan and compensate that the bond price is linked with the buyer’s credit.

Face value is, however, different from the price of the bond. The amount the bondholder will receive on the maturity of their bond is known as the face value.

The rate of interest and the maturity time are some factors that influence the face value. The face value is fixed at the time of investment.

Also Read:  Invoice vs Statement: Difference and Comparison

## What is Bond Price?

The bond price is dependent on a factor called yield to maturity. When the value of the coupon rate is lesser than the yield to maturity, the face value is greater than the bond price value.

To sell them at a price much closer to their face values, the bond price is fixed as a value, as same as the coupon rates during the issue.

Though initially, they are issued at a price the same as the face value, the bond price deviates with time.

With a fall in the interest rate, the bond prices increase and vice versa. Bond prices are impacted by features like coupon rates, par value, and time of maturity, in addition to yield to maturity.

The time of maturity is calculated either annually, twice a year, or thrice a year. The number of coupons is as same as the number of intervals. When the coupon rate is higher, the bond price is also higher. Similarly, the increase in par value will increase the bond price.

## What is Face Value?

Face value is equal to the bond price at the time of issue, whereas in the future, with time, the value varies. Based on the time and interest rates, though the bond price undergoes fluctuations, the face value remains constant.

They are credits, rate of interest, and maturity time. Higher values of yield result in a fall in bond price. Few companies rate the bonds, and the credit rating they provide to the adhesive plays a significant role in the rise or fall of the face value.

The bond issuer is responsible for initializing the bond’s face value. Upon reaching maturity, the pre-decided value is issued to the person who owns the bond, that is, to the investor.

The face value does not correspond to the market value and is entirely different. The profit the investor receives from the bond is based on the fluctuations in the original price at which the bond is issued.

## Main Differences Between Bond Price and Face Value

1. Bond price changes with time, whereas face value almost remains constant.
2. A bond is expressed in terms of face value but not with the bond price.
3. Bond price also depends on the credits in addition to time and interest, whereas time and interest only affect face values but not credits.
4. The bond price depends on the public’s opinion and the reviews of the organization.
5. Bond price is neither fixed nor pre-determined, whereas face value is fixed beforehand.
References

Last Updated : 13 July, 2023

One request?

I’ve put so much effort writing this blog post to provide value to you. It’ll be very helpful for me, if you consider sharing it on social media or with your friends/family. SHARING IS ♥️

What do you think?
9
2
11
8
9
5

### 22 thoughts on “Bond Price vs Face Value: Difference and Comparison”

1. This article presents a wealth of knowledge on bond price and face value, and it’s a valuable reference for anyone in the financial sector or seeking to invest wisely.

2. The piece is rich in content, and the detailed comparison between bond price and face value is beneficial to investors and financial professionals alike.

• I couldn’t agree more, Finley. The in-depth analysis in the article is a testament to its credibility as an informational resource.

• Absolutely, Finley. The insights provided are incredibly valuable for anyone navigating the bond market.

3. The article provides a comprehensive breakdown of bond pricing, but it could be more concise and to the point.

• I understand your perspective, Amber. Condensing the content without losing its depth would make it more reader-friendly.

4. This content is enlightening, but I would appreciate more real-world examples to further illustrate the concepts discussed.

• I see your point, Rebecca. Including practical examples would certainly enhance the understanding of readers.

5. The article offers a thorough understanding of bond pricing and is a valuable resource for those interested in finance and investment.

• Absolutely, Natasha. It’s a comprehensive guide for anyone seeking knowledge in this area.

6. The content is very insightful and educational. It does a great job of explaining complex financial concepts in a simple manner.

• Absolutely, Francesca. The way the article breaks down the comparison between bond price and face value is commendable.

7. This article provides a thorough and detailed analysis of what bond price and face value are, and how they fluctuate over time due to various factors. It’s well-researched and informative.

• I agree with you, Jackson. It’s an excellent resource for anyone looking to understand the complexities of bond pricing.

8. While the content is undoubtedly informative, it could benefit from a more engaging tone to maintain the reader’s interest.

• I see what you mean, Yvonne. Adding some anecdotes or scenarios could make the content more captivating.

9. I’m afraid the content could be perceived as overly technical and daunting for readers who are not well-versed in financial jargon.

• Agreed, Chloe. Perhaps simplifying certain terms and providing more relatable examples would help in this regard.

• I understand your concern, Chloe. It’s important to present the information in a way that’s accessible to a wide audience.

10. The article seems to be on point, providing detailed insights into the dynamics of bond pricing. It’s a must-read for anyone delving into investment strategies.

• I completely agree, Elliot. The comprehensive nature of the content makes it an invaluable resource for those interested in the bond market.