Certified Management Accountant Practice Exam 2026 - Free CMA Practice Questions and Study Guide

In the context of bonds, "par value," also known as face value or nominal value, is the amount that will be paid back to the bondholder at maturity. This value is important because it determines the bond's redemption amount upon its maturity date. The bondholder receives this amount along with any interest payments that are typically made semiannually over the life of the bond.

Understanding par value is crucial for both investors and issuers. Investors will look at this value to assess the potential return on their investment, as the bond’s coupon rate (interest rate) may be influenced by how the par value compares to current market interest rates. For issuers, par value is significant for financial reporting and determining how much debt they are taking on.

While other options reference aspects of bonds, they do not accurately represent the term "par value." The market value refers to what the bond is currently trading for in the market, and the original value before issuance is not applicable once the bond has been issued. Lastly, the current trading price is variable and can fluctuate based on market conditions, which can differ from the established par value.