Face value

Face value

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Encyclopedia
The Face value is the value of a coin
Coin
A coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....

, stamp
Postage stamp
A postage stamp is a small piece of paper that is purchased and displayed on an item of mail as evidence of payment of postage. Typically, stamps are made from special paper, with a national designation and denomination on the face, and a gum adhesive on the reverse side...

 or paper money
Paper Money
Paper Money is the second album by the band Montrose. It was released in 1974 and was the band's last album to feature Sammy Hagar as lead vocalist.-History:...

, as printed on the coin, stamp or bill itself by the minting authority. While the face value usually refers to the true value of the coin, stamp or bill in question (as with circulation coins) it can sometimes be largely symbolic, as is often the case with bullion coins. For example, a one troy ounce (31 g) American Gold Eagle
American Gold Eagle
The American Gold Eagle is an official gold bullion coin of the United States. Authorized under the Gold Bullion Coin Act of 1985, it was first released by the United States Mint in 1986.- Details :...

 bullion coin was worth and sold for about $1200 USD during 2009 market prices and yet has a face value of only $50 USD.

Overview


The face value of bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...

 usually represents the principal
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...

 or redemption value
Redemption value
Redemption value is the price at which the issuing company may choose to repurchase a security before its maturity date.A bond is purchased at a discount if its redemption value exceeds its purchase price. It is purchased at a premium if its purchase price exceeds its redemption value....

. Interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....

 payments are expressed as a percentage of face value. Before maturity, the actual value of a bond may be greater or less than face value, depending on the interest rate payable and the perceived risk of default
Default (finance)
In finance, default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant of the debt contract. A default is the failure to pay back a loan. Default may occur if the debtor is either...

. As bonds approach maturity
Maturity (finance)
In finance, maturity or maturity date refers to the final payment date of a loan or other financial instrument, at which point the principal is due to be paid....

, actual value approaches face value.

In the case of stock
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 certificates, face value is the par value
Par value
Par value, in finance and accounting, means stated value or face value. From this comes the expressions at par , over par and under par ....

 of the stock. In the case of common stock
Common stock
Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...

, par value is largely symbolic. In the case of preferred stock
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...

, dividends may be expressed as a percentage of par value.

The face value of a life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...

 policy is the death benefit. In the case of so-called "double indemnity" life insurance policies, the beneficiary
Beneficiary
A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example: The beneficiary of a life insurance policy, is the person who receives the payment of the amount of insurance after the death of the insured...

 receives double the face value in case of accidental death.

The face value of property
Property insurance
Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance or boiler insurance. Property is insured in two main...

, casualty
Casualty insurance
Casualty insurance, often equated to liability insurance, is used to describe an area of insurance not directly concerned with life insurance, health insurance, or property insurance. It is mainly used to describe the liability coverage of an individual or organization's for negligent acts or...

 or health insurance
Health insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is...

 policies is the maximum amount payable, as stated on the policy's face or declarations page.

Face value can be used to refer to the apparent value of something other than a financial instrument, such as a concept or plan. In this context, "face value" refers to the apparent merits of the idea, before the concept or plan has been tested.

Face value also refers to the price printed on a ticket to a sporting event, concert, or other event (the price the ticket was originally sold for by the organization hosting the event). In many jurisdictions, re-selling tickets for more than face value (or a certain amount above face value) constitutes ticket scalping and is illegal.

Taking someone at face value is assuming another person's suggestion, offer, or proposal is sincere, rather than a bargaining ploy.