The
paper money value depends on the amount written on the banknote issued by a particular bank and the bank is liable to give the bearer that much value printed on the paper money. The paper money is the promissory note and the paper money value is often termed as the legal tender.
Paper Money Value Definition
As a promissory note, the entailment of a paper money involves a contract that gives the details of the terms made by the maker to pay a sum of monetary value to the payee. The value of paper money can typically be referred to as the promissory note value or the value of note payable in accounting. The value of paper money gives the promise to pay the amount stated on the banknote, which differs from the basic principle of IOU note. Generally a banknote is a legal tender or forced tender and the value attached to it cannot be refused in settlement of a debt. Typically, the legal tender does not refer to money but carries the value of the money.
Paper Money Convertibility Value
The paper money value can be determined from the convertibility value of the paper money. The term convertibility refers to the ability to exchange a paper note for some other kind of value. A typical example of the paper money convertibility value involves that till the year 1965, a US certificate was payable in silver on demand from the Treasury.
A paper currency is said to be fully convertible to that unit if that banknote is payable on demand for a fixed unit. Financial convertibility value of a paper money refers to the exchange amount of that currency at the issuing bank for its worth of the bank's asset.
The paper money can also be converted at the issuing bank in exchange for a physical amount of a precious metal, say silver and this concept is known as physical convertibility value of paper money. For the economy, it is necessary that people go for financial convertibility rather than physical convertibility.
Paper Money Exchange Value
Apart from the printed value of a paper note issued by the central banks of every country in the world, the paper money also exhibits another value which is called exchange rate value. For the international trade, the exchange value of paper currency may vary with the value of other country's currency.