nominal value


Definition of nominal value

Examples of nominal value in a Sentence

Recent Examples on the Web Consequently, over time, more people immersed in those values rose to greater positions of influence, and the party’s actual behavior moved into closer aligned with its nominal values. Matthew Yglesias, Vox, "Just look at Bill Shine and Donald Trump.," 24 Sep. 2018 One clearinghouse alone—the London Stock Exchange ’s LCH.Clearnet—cleared transactions with a nominal value of around $900 trillion last year. Tom Fairless, WSJ, "The Next EU-U.S. Battleground: Clearinghouses," 1 June 2018 The stock market values the bank at less than half of the nominal value of its assets, an indication that investors believe there are hidden risks. Jack Ewing, New York Times, "Deutsche Bank Abandons Wall Street Ambitions, and Focuses on Europe," 26 Apr. 2018 Since the current long-term bull market in equities began in 1982, the nominal value of the U.S. stock market has climbed at a compound annual rate of 9.7%. Tom Saler, Milwaukee Journal Sentinel, "Tom Saler: The connection between corporate profits, public incomes is imprecise, at best," 12 Jan. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'nominal value.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of nominal value

1696, in the meaning defined above

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Time Traveler for nominal value

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The first known use of nominal value was in 1696

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Statistics for nominal value

Last Updated

31 Oct 2019

Cite this Entry

“Nominal value.” The Dictionary, Merriam-Webster Inc., Accessed 10 December 2019.

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More Definitions for nominal value

nominal value


Financial Definition of nominal value

What It Is

Also referred to as face value or par value, nominal value is the value shown on the face of a security certificate or instrument, including currency. The concept most commonly applies to stocks and bonds but is especially important to bond and preferred stock investors.

Nominal value is an often arbitrarily assigned amount used to calculate the dollar accounting value of a company’s stock for balance sheet purposes (par value is the term commonly used in this context). For bonds and preferred stock, however, nominal value represents the amount that must be repaid at maturity. Corporate bonds usually carry a $1,000 nominal value, municipal bonds usually carry a $5,000 nominal value, and government bonds usually carry a $10,000 nominal value.

How It Works

Let’s assume XYZ Company decides to issue $10 million in bonds to fund the construction of a new factory. The bonds mature in 20 years. If XYZ Company sells the bonds in $1,000 increments, each bond certificate would have a nominal value of $1,000 and the bearer of that bond would therefore be entitled to receive $1,000 from XYZ in 20 years.

If XYZ Company also agreed to pay 5% annual interest on the bonds, the bearer of an XYZ Company bond would also be entitled to $50 per year in interest payments.

Why It Matters

Nominal value is a crucial component of many bond and preferred stock calculations including interest payments, market values, discounts, premiums and yields.

As shown in the example above, the interest on bonds is usually calculated as a percentage of nominal value. Additionally, bondholders often receive a percentage over the bond’s face value as a redemption premium if the borrower repays the debt before it is due (this is often done on a sliding scale based on when the bonds are redeemed).

It is important to note that for stocks, nominal value (commonly called par value when referring to stocks) generally has no relation to market price. Bond prices, however, are heavily influenced by their nominal values and are quoted as a percentage of nominal value. Bond prices may diverge from their nominal values if their interest rates are above or below the interest rates offered by other similar bonds. Further, although a bond’s nominal value may represent the amount the bond was originally sold for (and thus how much the issuer was lent), many bonds are sold at a premium or discount to nominal value, depending on market conditions and the creditworthiness of the issuer. This is particularly true for zero-coupon bonds, which are always sold at a discount because the investor does not receive interest until the bonds mature.

Source: Investing Answers

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to state or do over again or repeatedly

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