4 min Read Mar 22, 2019
Face Value Discount refers to the situation where a debt instrument—such as a bond or debenture—is issued or trading in the secondary market at a price below its stated face (par) value. This discount compensates buyers for below-market coupon rates, credit risk, or remaining time to maturity. The yield on a bond trading at a discount is higher than its coupon rate. Zero-coupon bonds and Strip Bonds are extreme examples—they are always issued at a substantial face value discount and redeemed at full par value at maturity, with the difference representing the investor's total return.
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