The Corpus of Contemporary American English finds 370 uses of “on a par with” to 348 of “on par with”, or 322 to 272 if we exclude spoken news, sports magazines, and sports newspapers to reduce those using the term as golf jargon. Less strong a preference as found in ngrams, but still https://www.wave-accounting.net/ suggesting “on a par with” is the more common form. As good as, equal to, as in This violinist may be an amateur but he’s on a par with professional orchestral players. The noun par has meant “that which is equal” since the mid-1600s; the idiom here was first recorded in 1832.
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. The yield for bonds and the dividend rate for preferred stocks have a material effect on whether new issues of these securities are issued at par, at a discount, or at a premium. In its charter, the company promises not to sell its stock at lower than par value. This has no effect on the stock’s actual value in the markets.
- The noun par has meant “that which is equal” since the mid-1600s; the idiom here was first recorded in 1832.
- They can be issued at a premium (price is higher than the par value) or at a discount (price is below the par value).
- Due to the constant fluctuations of interest rates, bonds and other financial instruments almost never trade exactly at par.
- The reverse holds true if an investor buys a bond at a price below its par value – that is, the effective interest rate to the investor will be more than the stated interest rate on the bond.
Par value is static, unlike market value, which fluctuates with credit ratings, time to maturity, and interest rate fluctuations. 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.”
More meanings of on a par (with someone/something)
Thus, par value is important from the perspectives of both determining the maturity amount to pay back to investors, and the amount of interest to pay them. Most jurisdictions do not allow a company to issue stock below par value. 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, which is the interest rate that it yields.
No-par stocks have “no par value” printed on their certificates. Instead of par value, some U.S. states allow no-par stocks to have a stated value, set by the board of directors of the corporation, which serves the same purpose as par value in setting the minimum legal capital that the corporation must have after paying any dividends or buying back its stock. 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 receives less than the face value for the security, it is issued at a discount. If the issuer receives more than the face value for the security, it is issued at a premium.
In finance and accounting, par value means stated value or face value of a financial instrument. Expressions derived from this term include at par (at the par value), over par (over par value) and under par (under par value). Stack Exchange network consists of 183 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.
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What is Par Value for Preferred Stock?
The par value of stock has no relation to market value and, as a concept, is somewhat archaic.[when? Thus, par value is the nominal value of a security which is determined by the issuing company to be its minimum price. This was far more important in unregulated equity markets than in the regulated markets that exist today,[when? The par value of stock remains unchanged in a bonus stock issue but it changes in a stock split. If a company issues a bond with a 5% coupon, but prevailing yields for similar bonds are 10%, investors will pay less than par for the bond to compensate for the difference in rates. The bond’s value at its maturity plus its yield up to that time must be at least 10% to attract a buyer.
on a par with (someone or something)
In accounting, the par value allows the company to put a de minimis value for the stock on the company’s financial statement. Par value is also used to calculate legal capital or share capital. The shares in a corporation may be issued partly freelancers 2020 paid, which renders the owner of those shares liability to the corporation for any calls on those shares up to the par value of the shares. Par can also refer to a bond’s original issue value or its value upon redemption at maturity.
“on par with” vs “on a par with”
Some states allow companies to issue shares with no par value at all, so that there is no theoretical minimum price above which a company can sell its stock. Thus, the reason for par value has fallen into disuse, but the term is still used, and companies issuing stock with a par value must still record the par value amount of their outstanding stock in a separate account. A bond’s par value is its face value, the price that it was issued at. Over time, the bond’s price will change, due to changes in interest rates, credit ratings, and time to maturity. When this happens, a bond’s price will either be above its par value (above par) or below its par value (below par). If prevailing yields are lower, say 3%, an investor is willing to pay more than par for that 5% bond.
It is usually set at $1,000, which is the face amount at which the issuing entity will redeem the bond certificate on the maturity date. The par value is also the amount upon which the entity calculates the interest that it owes to investors. Thus, if the stated interest rate on a bond is 10% and the bond par value is $1,000, then the issuing entity must pay $100 every year until it redeems the bond.
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 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. 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 investor will receive the coupon but have to pay more for it due to the lower prevailing yields. All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional. Investors expect a return equal to the coupon for the risk of lending to the bond issuer.
Par value is the stock price stated in a corporation’s charter. The intent behind the par value concept was that prospective investors could be assured that an issuing company would not issue shares at a price below the par value. Bonds commonly sell on the open market at prices that may be higher or lower than the par value. These variations are caused by differences between the market interest rate and the stated interest rate of a bond, as well as changes in the credit rating of the bond. If the price is higher than the par value, the issuing entity still only has to base its interest payments on the par value, so the effective interest rate to the owner of the bond will be less than the stated interest rate on the bond. The reverse holds true if an investor buys a bond at a price below its par value – that is, the effective interest rate to the investor will be more than the stated interest rate on the bond.
In golf, it is normal to talk both of a player being “on par” meaning that they took the number of strokes that is the standard measure for the course in question, and also that they are “on par with” another player, meaning that they are currently (or finished) with an equal number of strokes. Because of this you will sometimes find “on par with” used figuratively for other contexts even outside of headline style and golf. The amount of the par value of a share of stock is printed on the face of a stock certificate. If the stock has no par value, then “no par value” is stated on the certificate instead. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘par.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. These examples are programmatically compiled from various online sources to illustrate current usage of the word ‘on (a) par with.’ Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors.
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