What does “at Par” Mean? Benefit, Example, 10+ Facts

“At Par” refers to “at face value.” Bonds, preferred stocks, and other debt securities can be exchanged at par, face value, below par, or above par. Continue reading to discover everything necessary.

What does “at Par” Mean?

The phrase “at par” refers to the face value. A bond, preferred stock, or other financial instrument may trade at face value, below face value, or above face value.

What does "at Par" Mean?

Unlike market value, which changes based on credit ratings, time till maturity, and interest rate variations, par value remains constant.

The par value is established at the time of issuance. When securities were issued in paper form, the par value was printed on the security’s face, thus the phrase “face value.”

Understanding at Par

Due to the change of interest rates, bonds and other financial instruments nearly never trade at par. A bond will not trade at par if current interest rates are above or below its coupon rate, which is its yield.

A bond that traded at par would be quoted as 100, indicating that it traded at par. A quotation of 99 indicates that the instrument is trading at 99 percent of its face value.

An obsolete version of par value for common stock exists. The company’s charter stipulates that it will not sell its stock for less than its par value. The shares are subsequently issued with a par value of one cent. This has no impact on the stock’s real market value.

A New Bond

When a corporation obtains the face value of a security when it issues a new bond, it is said that the bond was issued at par. A security is issued at a discount if the issuer receives less than the par value for it. A security is issued at a premium if the issuer receives more than the nominal value for it.

New issues of these instruments may be issued at par, at a discount, or at a premium, depending on the yield on bonds and the dividend rate on preferred shares.

What does "at Par" Mean?

When a bond trades at par, its yield is equal to its coupon. For the risk associated with lending to the bond issuer, investors anticipate a return equivalent to the coupon.

Example of at Par

If a corporation releases a bond with a coupon rate of 5 percent, but yields on comparable bonds are 10 percent, investors will pay less than par for the bond to compensate for the disparity in rates. To attract a buyer, the bond’s value at maturity plus its yield must be at least 10%.

If current rates are lower, say 3%, an investor is ready to pay a premium for a bond yielding 5%. Due to decreasing yields, the investor will receive the coupon but must pay a higher price for it.

What Is a Bond’s Par Value?

The par value of a bond is its face value, which is the price at which it was originally issued. The par value of the majority of bonds is either $1,000 or $100.

Due to changes in interest rates, credit ratings, and time to maturity, the price of the bond will fluctuate over time. When this occurs, a bond’s price will either be higher than its par value (above par) or lower than its par value (below par) (below par).

Are Bonds Always Issued at Par Value?

No, not all bonds are issued at par value. They may be issued at a premium (a higher price than their face value) or a discount (price is below the par value). The reason a bond is issued at a price other than its par value is due to the present market interest rate environment.

For instance, a bond would trade at a premium if its yield is greater than market rates. If a bond’s yield is below market rates, it will trade at a discount to increase its appeal.

What Is a Bond’s Coupon Rate?

The coupon rate of a bond is the specified amount of interest that the bond will pay an investor upon issuance. The coupon rate is distinct from the yield of a bond. Bond yield is the effective rate of return when the price of the bond fluctuates. The yield of a bond is computed as coupon rate / current bond price.

What does "at Par" Mean?

Bond Yields and Coupon Rates

Typically, the market interest rate on a bond that is trading at par value is identical to its coupon rate. In turn, bondholders anticipate a return equivalent to the coupon for the cost of borrowing incurred by the issuer.

Par Coupon Rate = Interest Rate

The Coupon Rate and the Interest Rate in Relation to the Bond Price

Bond Price Formula


  • C is the coupon payment.
  • n is the number of payment periods.
  • i is the interest rate.
  • FV is the value at maturity. Face value is also known as par value.

The bond price calculation algorithm is displayed above. Bond prices are calculated using the present value formula. Noting that the coupon rate and interest rate are key to bond pricing or valuation, and keeping in mind that a bond trading “at par” will have the same coupon rate and interest rate, is critical.

Consider a bond with $100 par value and a five-year maturity. The coupon rate for the bond is 6% each year. The current interest rate on the market is 6%.

Using the bond pricing method, we can now demonstrate that the value of the bond is “at par.”

Bond Pricing - Sample Calculation

Coupon and Interest Rates

Coupon interest rates are computed as a percentage of the face value of the bond, but they differ from interest rates on other financial instruments since the dollar amount, not the percentage, is set throughout time.

A bond with a par value of $100 and a coupon rate of 5% will pay $5 in interest regardless of its price movement.

Par Values and Stocks

In equity markets, par value is of little or no significance, as it does not necessarily alter the stock’s price. The articles of incorporation of the issuer typically provide a par value of $0.01 per share. However, preferred stock par values might be greater because they are also used to calculate dividends.

What does "at Par" Mean?

How Does At Par Work?

Suppose Company XYZ offers $10 million in bonds to the general public. It may do this by issuing 10,000 bonds, each with a face value of $1,000. This signifies that when each bond matures, the holder will get $1,000.

Most business bonds have face values of $1,000, whereas municipal and federal bonds often have face values of $5,000 and $10,000, respectively.

Let’s imagine that three months have passed and that buyers and sellers are engaged in bond market transactions.

As a result of Firm XYZ’s recent need to lay off employees and reduce its marketing budget due to a lack of cash, the company has become more risky. In consequence, this reduces the likelihood that the corporation will repay its loan when it comes due.

Consequently, the bonds are worth less, say $800 per bond. The bond markets describe this price as a percentage of par value; hence, these bonds are trading at 0.8, which is below par. If the bonds were still valued at $1,000 apiece, they would be “trading at par” or “at 100.”

Par value is of minimal importance for stocks because it does not often affect the stock price itself. The articles of incorporation of the issuer normally provide par values of $0.01 per share for stocks.

However, par values for preferred shares may be greater because they are frequently utilized to compute dividends.

Why “At Par” Matters

The standard for pricing bonds is the par value. When the price of a bond falls below its par value, it is regarded to be “discounted” or trading at a discount; conversely, when the price of a bond rises beyond its par value, it is thought to be trading at a premium.

What Is the Relationship Between Coupon Rate and Par Value?

What Is a Bond’s Par Value?

The par value of a bond is one of its most essential properties. A bond is simply a written guarantee that the sum borrowed to the issuer will be returned, and the par value is the amount of money the issuer pledges to repay bondholders at the bond’s maturity date.

What does "at Par" Mean?

In addition to establishing the maturity value, the par value also establishes the coupon payment amount. Because these are the most common denominations in which bonds are issued, the par value of a bond is normally $1,000 or $100.

What Is a Stock’s Par Value?

The par value of a share is the stock’s specified value in the company charter. Typically, shares have no par value or a very low par value, such as a penny per share.

In the case of equities, the par value has a tenuous relationship with the market price of the shares. Certain states mandate that corporations establish a minimum par value below which shares cannot be sold.

In order to comply with state rules, the majority of corporations set a minimal par value for their stocks. For instance, Apple (AAPL) shares have a par value of $0.00.

Coupon Rate and Par Value

Comparing the coupon rate, which is the monthly interest payments provided to bondholders as recompense for loaning the issuer the money, to the economic interest rate determines whether a bond will trade at, below, or above its par value.

If the coupon rate and interest rate are equal, the bond will trade at par value. However, if interest rates rise, the price of a bond with a smaller coupon must fall in order to provide investors the same return, leading it to trade below par.

In contrast, if interest rates decrease, the price of a bond with a greater coupon rate would increase and trade over par, since its coupon rate is more enticing.

Are Bonds Issued at Par Value?

There is no requirement that bonds be issued at their par value. Depending on the level of interest rates in the economy, they may also be offered at a premium or a discount.

What does "at Par" Mean?

A bond trading at a premium is said to be trading at a premium, whereas a bond trading at a discount is said to be trading at a discount.

During periods when interest rates are low or declining, a greater proportion of bonds will trade at a premium or over par. A greater fraction of bonds will trade at a discount when interest rates are high.


The price level of a bond is denoted by the term “at par.” When a bond is sold at par, it is sold at its face value. The price of bonds reveals investors’ expectations for market interest rates. Which bonds sell at par, at a premium, and at a discount reveals the interest rate forecasts of the market.

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