Georgia Assessments for the Certification of Educators GACE Practice Test

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The par value of a bond is the:

Amount of interest that the bond pays
Amount of time until the bond matures
Amount paid when the bond matures
Average interest rate paid by a given type of bond over subsequent issues

The correct answer is: Amount paid when the bond matures

The par value of a bond is the amount that the bond issuer agrees to pay back to the bondholder when the bond reaches its maturity date. This amount does not change and is usually stated on the bond certificate. The other options are incorrect because A) The amount of interest that a bond pays is determined by the coupon rate, which is a percentage of the par value. Therefore, the par value itself is not the amount of interest paid. B) The amount of time until the bond matures is known as the term or tenor of the bond, and it does not directly relate to the par value. D) The average interest rate paid by a given type of bond over subsequent issues is known as the yield, and it is not related to the par value of a specific bond.