What Is Face Value In Stock Market?
Face Values of Bonding
The face value of a bond is the amount that the issuer gives to the bondholder after the bond has been paid off. The profit or the value of the bond may be based on the interest rate or the face value of the bond at maturity. For bonds, face values will provide a guaranteed profit.
The Face Value of a Bond
The face value is the amount of money the issuer gives to the bondholder once the bond is mature. The profit on a bond may be based on the increase from a below-par original issue price and the face value at maturity, or it may be based on the additional interest rate. The face value of a stock or bond does not represent the actual market value, which is determined by principles of supply and demand often governed by the dollar figure at which investors are willing to buy and sell a particular security. The market value and face value may not have much correlation.
Market Value of the Universe
The Market Value is arrived at by taking the factors of demand supply into account. A greater demand oversupply would show an increase in the market value and a decrease in the price.
A Face Value Example of Shares and Bond
You can understand the importance of the face value of shares with an example. If a company wants to raise 10 lakh bonds with a face value of Rs 100 each, it can do so. The company's face value will help it calculate the various expenditures.
If the company pays 3% interest on its bonds, it will spend Rs 30,000 on payouts each year. Before starting your trading journey in stock markets, it is important to know the face value and market value of shares and bonds. You must always open your account with a stock broker.
The Total Market Value of a Company
The total market value of a company is calculated by taking the current share price of the company and dividing it by the total outstanding shares. The face value of a company is lower than the market value. A company can have a face value of Rs 10 when it goes public.
It could be traded at a market price of Rs 500. The face value of a company is unaffected by market price fluctuations. The face value of a company will be reduced if a stock split is implemented.
If the current face value of the company is Rs 10, then it will splits stock in a ratio of1:1. The face value of that company will be the same. The total number of shares will double after the stock split, so the face value will change to Rs 5.
What is a stock?
People get mixed between their meanings and can't decipher them in a correct way. Various people use them in different ways which is completely wrong. It is important for you to know the difference between them as they have completely different meanings.
The face value of a stock does not change even if the company splits it into two or more shares. If the company gets liquidated, shareholders will be paid the amount of money they would have received if the company had not gone down. The net value of the organisation in its books is the book value.
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