1. What is Bond Face Value?

The face value (or par value) of a bond is the amount the issuer agrees to repay the bondholder at maturity. This calculator determines the face value needed to achieve a certain price given the yield and time to maturity.

2. How Does the Calculator Work?

The calculator uses the bond pricing formula:

Where:

• \( Price \) — Current bond price in dollars
• \( Yield \) — Annual yield as a percentage
• \( Periods \) — Time to maturity in years

Explanation: The formula discounts the bond price back to its face value using the yield and time period.

3. Importance of Face Value Calculation

Details: Understanding the relationship between price, yield, and face value is crucial for bond investors to evaluate investment opportunities and compare different bonds.

4. Using the Calculator

Tips: Enter the bond price in dollars, yield as a percentage (e.g., 5 for 5%), and time to maturity in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between face value and market value?
A: Face value is the amount repaid at maturity, while market value is the current trading price which may be higher or lower than face value.

Q2: How does yield affect face value?
A: Higher yields result in lower calculated face values for a given price, as future cash flows are discounted more heavily.

Q3: What if the bond pays coupons?
A: This calculator assumes a zero-coupon bond. For coupon-paying bonds, a more complex calculation is needed.

Q4: Can this be used for discount bonds?
A: Yes, it works for both discount bonds (price < face value) and premium bonds (price > face value).

Q5: How accurate is this calculation?
A: It provides a precise calculation for zero-coupon bonds assuming constant yield over the period.