What is Denomination?
Usually associated with currency, a denomination is the value specified on a monetary instrument.
How Does Denomination Work?
Denomination values are graduated and usually divisible by some common denominator (hence, 'denomination'). For example, in addition to the $1 bill, denominations of U.S. paper money include $5, $10, $20, $50, and $100 notes, all divisible by 5.
Though denominations are generally discussed with regard to currency, financial instruments such as bonds are also generally issued in different denominations.
Why Does Denomination Matter?
Where currency is concerned, denominations provide the bearer with a range of values depending on how much money he or she will need to spend. In the case of financial instruments such as bonds, denominations provide investors with a range of values based on what they are able to afford.
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