Definition
Face value, also called par value, is the amount a bond issuer promises to repay at maturity and the base on which the coupon is calculated. It is fixed by the bond's terms and does not change when the market price moves.
How it works
Face value is set when the bond is issued, and the coupon is calculated on it rather than on the price you pay. Bond prices are commonly quoted as a percentage of face value, so a quote of 98.50 means 98.50% of par.
A price below face value is called a discount, above it a premium. Discounts usually arise when market yields exceed the coupon rate or credit concerns grow; premiums arise in the opposite case. At maturity the issuer owes the face value regardless of the price you paid.
Formula / convention
Market price = Face value × Quoted price ÷ 100 (when the price is quoted as a percentage of par)
Illustrative example
A fictional bond has a face value of HK$10,000 and is quoted at 98.50, so a buyer pays 98.50% × HK$10,000 = HK$9,850 before accrued interest. Its 3% coupon is still 3% × HK$10,000 = HK$300 a year, and HK$10,000 is repaid at maturity.
What to watch for
A bond bought below face value is not a guaranteed gain: the discount often reflects higher interest-rate or credit risk, and repayment depends on the issuer's ability to pay.