Definition of 'Original Face'
The original face value of a bond is important because it determines the amount of interest that the bondholder will receive. The interest rate on a bond is expressed as a percentage of the original face value. For example, if a bond has an original face value of $1,000 and an interest rate of 5%, the bondholder will receive $50 in interest each year.
The original face value of a bond also determines the price of the bond. The price of a bond is the present value of all of the future interest payments and the principal amount. The present value is calculated using a discount rate, which is the interest rate that the bondholder could earn on an alternative investment.
The original face value of a bond is not always the same as the market value of the bond. The market value of a bond is the price that a buyer is willing to pay for the bond. The market value of a bond can be higher or lower than the original face value, depending on the current interest rates and the perceived risk of the bond.
The original face value of a bond is an important concept to understand for anyone who is interested in investing in bonds. The original face value determines the amount of interest that the bondholder will receive and the price of the bond.
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