In finance, the term “face value” denotes the value at which a security can be redeemed for underlying assets. The face value of a coin or banknote, for example, dictates the value at which it can be redeemed for goods or services.
In trading, the term “face value” is most commonly used in connection with bonds and other debt instruments. The face value of a bond defines the amount of money for which the bond can be redeemed when it reaches maturity.
A bond’s face value is normally equal to the amount paid for the bond. However, it may also be an amount higher than that paid for the bond (as is the case with zero coupon bonds).
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