What is ‘Face-Amount Certificate Company’
Debt securities are issued by investment firms to their investors as a form of debt financing. These securities are referred to as face-amount certificates, and they are backed by security interests in assets such as real estate or other financial instruments. The nature of this financing is comparable to that of mortgage bond debt financing.
Explaining ‘Face-Amount Certificate Company’
As a result of this strategy, a firm may acquire financing at relatively cheap interest rates since the loan is secured by particular physical assets within the ownership of the company in question. In most cases, investors who hold face-amount certificates will be paid a defined amount of interest each year, and they will be reimbursed the principle (or face amount) of their investments at a predetermined termination date.
Face-Amount Certificate Company FAQ
Are face amount certificates redeemable?
Certificates with a face value of $1,000 or more pay interest at a fixed rate. In your capacity as the owner of a face amount certificate, you have the option of redeeming your certificate either at maturity for the face amount or before maturity for the surrender value.
What does face amount certificate means?
A face-amount certificate business is a form of firm that obtains funds by issuing debt securities to investors with a predetermined value in exchange for their money. These instruments, known as face-amount certificates (FACs), are backed by a security interest in the value of the certificate. This strategy is comparable to mortgage bond debt financing in that it is a debt financing method.
Further Reading
- Financing a foreign war: Jacob H. Schiff and Japan, 1904–05 – www.jstor.org [PDF]
- Negotiated vs. Competitive Debt Financing – heinonline.org [PDF]
- Investment Company Act of 1940 – heinonline.org [PDF]
- Financial engineering in corporate finance: An overview – www.jstor.org [PDF]
