# What Does At Par Mean? Understanding How Bonds and Stocks Trade at Face Value

## What Is At Par?

The term "at par" means at [face value](https://www.investopedia.com/terms/f/facevalue.asp). A bond, preferred stock, or other debt instrument may trade at par, [below par](https://www.investopedia.com/terms/b/below-par.asp), or [above par](https://www.investopedia.com/terms/a/abovepar.asp).

Par value is fixed, while market value changes with credit ratings, time to maturity, and interest rates. The par value is assigned at the time the security is issued. When securities were issued in paper form, the par value was printed on the face of the security, hence the term "face value."

### Key Takeaways

*   Bonds generally trade at, above, or below par based on market interest rate fluctuations, time to maturity, and credit quality, emphasizing how external factors influence a bond's market price compared to its face value.  
    
*   Trading 'at par' indicates that a bond or preferred stock is valued at its original face value; that value resettles at maturity regardless of interim price fluctuations due to economic factors.  
    
*   The coupon rate of a bond determines its initial interest payment and serves as a baseline for evaluating whether the bond should be issued at a discount or premium relative to prevailing market rates.  
    
*   The issuance price of new bonds might not always align with their par value, as they may be sold at a discount or premium depending on interest rate changes, illustrating investor demand based on yield attractiveness.

## Exploring the Dynamics of Trading at Par

Due to the constant fluctuations of interest rates, bonds and other financial instruments almost never trade exactly at par. A bond will not trade at par if current interest rates are above or below the bond's [coupon rate](https://www.investopedia.com/terms/c/coupon-rate.asp), which is the interest rate that it yields.

A bond that was [trading at par](https://www.investopedia.com/terms/b/bondquote.asp) would be quoted at 100, meaning that it traded at 100% of its par value. A quote of 99 would mean that it is trading at 99% of its face value.

Par value for common stock exists in an anachronistic form. In its charter, the company promises not to sell its stock at lower than par value. The shares are then issued with a par value of one penny. This has no effect on the stock's actual value in the markets.

## Issuing Bonds: At Par, Discount, or Premium

If, when a company issues a new bond, it receives the face value of the security, the bond is said to have been issued at par. If the issuer gets less than the security's face value, it's issued at a [discount](https://www.investopedia.com/terms/d/discountbond.asp). If the issuer receives more than the face value for the security, it is issued at a [premium](https://www.investopedia.com/terms/p/premiumbond.asp).

Bond yields and dividend rates for preferred stocks greatly affect whether securities are issued at par, a discount, or a premium.

A bond that trades at par has a yield equal to its coupon. Investors expect a return equal to the coupon for the risk of lending to the bond issuer.

## Practical Example: Understanding At Par

If a bond has a 5% coupon, but similar bonds yield 10%, investors will pay less than par to cover the rate difference. The bond's value at [maturity](https://www.investopedia.com/terms/t/termtomaturity.asp), plus its yield up to that time, must be at least 10% to attract a buyer.

If prevailing yields are lower, say 3%, an investor is willing to pay more than par for that 5% bond. The investor will receive the coupon but have to pay more for it due to the lower prevailing yields.

## What Is a Bond's Par Value?

A bond's par value is its face value, the price that it was issued at. Most bonds are issued with a par value of $1,000 or $100. Over time, the bond's price will change, due to changes in interest rates, credit ratings, and [time to maturity](https://www.investopedia.com/terms/p/pull-to-par.asp). When this happens, a bond's price will either be above its par value (above par) or below its par value (below par).

## Are Bonds Always Issued at Par Value?

No, bonds are not always issued at par value. They can be issued at a premium (price is higher than the par value) or at a discount (price is below the par value). The reason for a bond being issued at a price that is different than its par value has to do with current market interest rates. For example, if a bond's yield is higher than market rates, then a bond will trade at a premium. Conversely, if a bond's yield is below market rates, then it will trade at a discount to make it more attractive.

## What Is a Bond's Coupon Rate?

The coupon rate of a bond is the stated amount of interest that the bond will pay an investor at the time of its issue. A bond's coupon rate is different from a bond's yield. A bond's yield is its effective rate of return when the bond's price changes. A bond's yield is calculated as coupon rate / current bond price.