Face value also known as par value, is equal to the price of the bond when it was first published, but after that, the price of the bond fluctuates in the market in accordance with changes in interest rates if the nominal value remains fixed.
Different environmental conditions bond prices and yields can be confusing to the average investor. A bond is a loan investors for the company issuing bonds, face value is the principal amount of the Issuer’s bond loan. Principal amount of the loan is payable on a specified future date and interest payments are made to the investor regularly, at certain intervals during the term of the loan, typically every six months.
Bonds with a fixed rate security or investment instrument. The interest rate paid by the bond investor or the acquirer is a fixed, stated amount and bond yields, the interest amount in relation to the current price of the bond market, varies with the price. Like bonds, the price ranges, the price is described with respect to the original par value or face value; the bonds are referred to as trade or margin, synonymous with above par value, or below their face value, which is often called a discount.
Three factors influencing the current market price of a bond are the credit rating of the person who issued the bond, the market demand for bonds and the time remaining to the redemption date. The maturity date is an important factor, as the bond approaches the maturity date, i.e. the date when the bondholder receives the full face value of the bonds, price of bonds, of course, tends to approach nominal.
The interesting aspect of pricing of the bonds and demand manifests itself in the impact of reports issued by the companies rating services such as Moody’s and Standard & Poor’s. Downgrades usually cause the price of bonds will decrease because it is not as attractive to buyers. But when the price falls, the effect tends to increase the attractiveness of the bonds for a price reduction bonds offer a higher yield.