Listen to a Business English Dialogue about Face value
Bruce: Hi Olivia, do you know what face value means in finance?
Olivia: Hey Bruce! Yes, face value refers to the nominal value of a financial instrument, such as a bond or a stock, as stated on the instrument itself.
Bruce: That’s right, Olivia. For bonds, face value is the amount that the issuer promises to repay to the bondholder when the bond matures.
Olivia: Exactly, Bruce. And for stocks, face value, also known as par value, is the value assigned to each share by the company at the time of issuance.
Bruce: Yes, Olivia. However, it’s important to note that the face value of a financial instrument may not necessarily reflect its current market value.
Olivia: Right, Bruce. In the case of bonds, their market value may be higher or lower than their face value depending on factors such as interest rates and the creditworthiness of the issuer.
Bruce: Absolutely, Olivia. And for stocks, their market value is determined by supply and demand in the stock market, which can fluctuate independently of their face value.
Olivia: That’s correct, Bruce. So, while face value provides a baseline value for financial instruments, investors should consider both face value and market value when making investment decisions.
Bruce: Yes, Olivia. Understanding the relationship between face value and market value can help investors assess the potential risks and rewards of their investments.
Olivia: Definitely, Bruce. By being aware of these factors, investors can make more informed decisions to achieve their financial goals.