Chartered Property Casualty Underwriter (CPCU) 530 Practice Exam

What term refers to the nominal value assigned to a share?

Market Value Book Value Liquidation Value Par Value

Correct Answer:

Par Value

Explanation:

Par value is the nominal value printed on a stock certificate—the face or stated value assigned to each share in the corporate charter. It represents the amount the company initially assigns to a share for legal and accounting purposes, such as establishing the minimum legal capital. This value is fixed and does not reflect what investors pay in the market, which is determined by supply and demand. In contrast, market value fluctuates with trading, book value is based on the company’s accounting net assets per share, and liquidation value is the cash you'd receive if the company were dissolved.

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