1. What is Face Value of a Bond?

The face value (or par value) of a bond is the amount the issuer agrees to repay the bondholder at maturity. It's used to calculate coupon payments and represents the principal amount of the bond.

2. How Does the Calculator Work?

The calculator uses the face value equation:

Where:

• \( Price \) — Current price of the bond (USD)
• \( C \) — Coupon payment per period (USD)
• \( r \) — Interest rate per period (decimal)
• \( t \) — Number of coupon periods remaining
• \( n \) — Total number of periods to maturity

Explanation: The equation discounts all future coupon payments from the bond price and then compounds the residual value to maturity to find the face value.

3. Importance of Face Value Calculation

Details: Knowing the face value helps investors understand the bond's yield-to-maturity, compare bond prices, and assess investment returns.

4. Using the Calculator

Tips: Enter all values in USD except the interest rate which should be in percentage. Ensure periods are consistent (e.g., all annual or all semi-annual).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between face value and market value?
A: Face value is fixed and stated on the bond, while market value fluctuates based on interest rates and credit risk.

Q2: Can face value change over time?
A: No, face value remains constant unless the bond terms are modified through corporate actions.

Q3: What if my bond has zero coupons?
A: For zero-coupon bonds, the face value is simply the price compounded at the yield rate to maturity.

Q4: How does interest rate affect face value?
A: The calculator shows the mathematical relationship, but actual face value is contractually fixed - changing rates affect price, not face value.

Q5: Should I buy bonds above or below face value?
A: Depends on your strategy. Below face value (discount) offers capital gains, above (premium) offers higher coupon payments.