What is the face value of a bond?
A)the market price of the bond
B)the difference between the amount owned by the issuer and the market price of the bond
C)the amount owned by the issuer
D)the interest earned by the owner of the bond

Question

Quizplus · Accepted Answer

The face value of a bond is the amount owned by the issuer and is also known as the par value or principal value. It is the amount that the issuer promises to pay back to the bondholder at maturity. The face value is different from the market price of the bond, which may be higher or lower than the face value depending on various factors such as interest rates, credit rating, supply and demand, and so on. Therefore, choice A (market price of the bond) and choice D (interest earned by the owner of the bond) are incorrect as they do not represent the face value of the bond. Choice B (difference between the amount owned by the issuer and the market price of the bond) is also incorrect as it confuses the face value with the market value.

What Is the Face Value of a Bond