Par Value

Written by Fmi.Online Thursday November 17, 2022
Par value is the dollar amount assigned to each share of stock in the corporate charter when the corporation is formed. In other words, when incorporation papers are made, a par value is assigned saying the company stock is worth at least this much per share. Some companies set their par value at $1 while others set their stocks’ par value at $10. There is no limit as to how high or low the stock par value has to be. The par value is usually set at a low price to encourage investors.

Explanation: 

Many states have laws that recognize the par value as a minimum legal capital. This is the lowest amount someone can pay for the stock. If someone pays a price under the minimum legal capital, they will owe the company the difference at a future date.    

In a nutshell: 

  • Par value, also known as nominal value, is the face value of a bond or the stock value stated in the corporate charter.
  • Par value for a bond is usually $1,000 (or to a lesser degree $100), as these are the most common denominations in which they are issued.
  • Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments.
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