What is “on par in economics?

"At par" is an expression that is used in the relationship between the nominal value and the effective value of a financial security. Thus, to understand this concept the stock exchange, you have to take into account what each one means:

  • The nominal value: when the company issues a series of financial titles, the value of each title is called nominal value and is shown in it.
  • The effective value: is the value obtained when, for example, a sale of financial securities is carried out. It is also called real value or market value. It can be equal to or different from the nominal value.

If a company issues securities with a nominal value of 10 euros, and makes a sale of those securities for the same value (effective value), then we find a transaction that has been carried out "at par", that is, the value nominal is the same as the effective value.

The main issuance of securities are shares obligations and bonuses. Let's see how each one is issued "at par."

Issuance of shares at par

A company issues shares in the primary market. Then you continue issuing to increase your capital. When the company sets the price of the share of the second issues at the same price as the nominal value of the first issue, then we find an issue of shares at par.

Par value of a bond or obligation at par

When we speak of bonds and obligations at par, we mean that on the maturity date of the title, the same value as nominal value is returned to the holder of the title. Knowing the par value of financial securities is important to calculate, for example, the dividends of preferred shares or the size of the periodic payment of a coupon.

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