What Is Nominal Value?

What Is Nominal Value? | Definition, Characteristics, and Comparison with Market Value

What does nominal value mean? Discover how nominal value is used in bonds, stocks, and accounting, how it differs from market value, and what it means for investors in this comprehensive guide.

Published by Zeynep ÖZTÜRK

25 July 2025, 12:56 published Updated 25 July 2025, 12:56

Nominal value refers to the face value printed or stated on a financial instrument. It is the original value assigned at issuance and remains fixed, regardless of market fluctuations. Nominal value is commonly found on bonds, stocks, and currency.

For instance, if a bond is issued with a nominal value of 1,000 TRY, this is the amount that will be repaid at maturity. However, that bond may be bought or sold in the market at prices above or below this amount.

Where Is Nominal Value Used?

Nominal value is a foundational concept across various financial instruments. Here are the main contexts in which it appears:

1. In Bonds

The nominal value of a bond is the amount the issuer agrees to repay the bondholder at maturity. Coupon payments are also calculated based on this nominal amount. For example, a 1,000 TRY bond with a 10% annual coupon yields 100 TRY per year, regardless of its market price.

2. In Stocks

In the context of stocks, nominal value is the per-share value recorded in the company’s capital structure. In Turkey, the nominal value of a stock is often set at 1 TRY. However, the stock’s market value, determined by trading activity, usually differs from its nominal value.

3. In Currency

The nominal value of money is simply the number printed on the currency. A 100 TRY banknote has a nominal value of 100 TRY. However, inflation can erode its real purchasing power over time, making nominal and real values diverge.

Difference Between Nominal Value and Market Value

Feature	Nominal Value	Market Value
Definition	Fixed value stated on the instrument	Dynamic value determined by market forces
Variability	Constant	Fluctuates with supply and demand
Influencing Factors	Legally or contractually determined	Economic trends, investor sentiment, performance

Understanding these differences is vital for investors seeking to assess the true worth of their financial assets.

Why Nominal Value Matters for Investors

While nominal value provides a reference point, relying solely on it for investment decisions may lead to misjudgments.

For Bonds: The nominal value determines coupon payments. However, the yield an investor actually receives depends on the price paid for the bond.
For Stocks: Nominal value plays a role in calculating dividends and in capital restructuring, but market value drives investment decisions.

Relationship Between Nominal Value and Inflation

Nominal values do not adjust for inflation. Therefore, a nominal return may be misleading if inflation is high. For example, a bond might yield 10% annually, but if inflation is at 12%, the investor is actually losing value in real terms.

This distinction highlights the importance of evaluating real returns, not just nominal figures.

Nominal Value in Accounting

In accounting, nominal value is used when recording various financial transactions:

Recognizing debt and receivables
Registering corporate capital
Recording securities like bonds and stocks

While accounting records typically rely on nominal value, financial analysis often requires market values for a more accurate picture.

Examples of Nominal Value in Practice

Bond Example:

Nominal Value: 1,000 TRY
Coupon Rate: 10%
Annual Return: 100 TRY

If this bond is purchased at 950 TRY in the secondary market, the investor’s yield increases due to the discount on the purchase price.

Stock Example:

Company’s total capital: 1,000,000 TRY
Number of shares issued: 1,000,000
Nominal value per share: 1 TRY

However, the stock may be trading at 30 TRY per share on the exchange, indicating a significantly higher market valuation.

Limitations of Nominal Value

While nominal value is a helpful starting point, it has several limitations:

It doesn’t reflect current market conditions.
It may mislead investors if interpreted as market worth.
It ignores purchasing power and inflation effects.

As such, professional investors complement nominal values with real value assessments, discounting techniques, and yield calculations.

How Important Is Nominal Value?

Nominal value is a fundamental concept in finance and accounting. However, it should not be the sole basis for investment or valuation decisions. Whether you’re dealing with bonds, stocks, or currency, always consider inflation, market trends, and the real value behind the numbers.

In short: Nominal value is where evaluation begins—true financial insight begins by looking beyond it.