What Does It Mean To Buy At A Premium?

Why would anyone buy a premium bond?

A person would buy a bond at a premium (pay more than its maturity value) because the bond’s stated interest rate (and therefore its interest payments) are greater than those expected by the current bond market.

It is also possible that a bond investor will have no choice..

What’s another word for premium?

In this page you can discover 40 synonyms, antonyms, idiomatic expressions, and related words for premium, like: prime, superior, bonus, prize, reward, award, bounty, something extra, added, dividend and remuneration.

What is the meaning of the idiom face the music?

The Cambridge Dictionary describes the idiom as meaning “to accept responsibility for something you have done.” Commonly used in situations in which one has to face the consequences for their actions, it’s a short and simple phrase that can be used both teasingly and seriously, reducing the need to be wordy.

How do you tell if a bond is sold at a premium or discount?

Said another way, if a bond that is trading on the market is currently priced higher than its original price (its par value), it is called a premium bond. Conversely, if a bond that is trading on the market is currently priced lower than its original price (its par value), it is called a discount bond.

What is an example of a premium bond?

A bond that’s trading at a premium means that its price is trading at a premium or higher than the face value of the bond. For example, a bond that was issued at a face value of $1,000 might trade at $1,050 or a $50 premium. … In other words, investors can buy and sell a 10-year bond before the bond matures in ten years.

What does buying at a premium mean?

“At a premium” is a phrase attached to a variety of situations where a current value or transactional value of an asset is above its fundamental value. The full phrase would be company X is trading at a premium to company Y, or a commercial building was sold at a premium to its underlying value, and so on.

Is a premium bond good or bad?

With Premium Bonds there is no risk to your capital – so the money you put in is totally safe – it is only the ‘interest’ that is a gamble. And as Premium Bonds are operated by NS&I which, rather than being a bank, is backed by the Treasury, this capital is as safe as it gets.

Is it better to buy a bond at discount or premium?

Regardless of what you pay for a bond, at maturity you will get back its full face value. If you buy a discount bond, you will have a capital gain; if you buy a premium bond, you will have a capital loss. But you could also lose money in a discount bond and come out ahead with a premium bond.

When a bond is sold at a premium the carrying value will?

When a bond is issued at a premium, the carrying value is higher than the face value of the bond. When a bond is issued at a discount, the carrying value is less than the face value of the bond. When a bond is issued at par, the carrying value is equal to the face value of the bond.

How do I buy a premium bond?

How do I buy Premium Bonds?Buying online. You can buy Premium Bonds online using our secure online system. … Buying over the phone. You can call us all day, every day. … Buying by post. Simply complete an application form and send it to us, with a cheque payable to NS&I. … Bank transfer or standing order.

What is the premium of an option?

An option premium is the current market price of an option contract. It is thus the income received by the seller (writer) of an option contract to another party. In-the-money option premiums are composed of two factors: intrinsic and extrinsic value.

Who pays the option premium?

An option premium is the price paid by the buyer to the seller for an option contract. Premiums are quoted on a per-share basis because most option contracts represent 100 shares of the underlying stock. Thus, a premium that is quoted as $0.10 means that the option contract will cost $10.

Who pays the premium in a call option?

A call option is a financial contract that gives the buyer the right to purchase the underlying shares at an agreed price. The call premium is the price paid by the buyer to the seller (or writer) to obtain this right.

Is the value premium dead?

The relative performance of value stocks in the U.S. has been so poor in the past few years that many investors have jumped to the conclusion that the value premium is dead. … However, that study did find weak evidence of a U.S. value premium.

Does the value premium still exist?

The longest stretch of value outperformance in the past 30 years came during the economic and commodity boom of 2000 to 2008. In other years, the value premium has been largely nonexistent.

What is premium value?

In investing, value premium refers to the greater risk-adjusted return of value stocks over growth stocks. Eugene Fama and K. G. French first identified the premium in 1992, using a measure they called HML (high book-to-market ratio minus low book-to-market ratio) to measure equity returns based on valuation.

Is at a premium meaning?

1 : for a high price Land in the county is selling at a premium. Rooms with a view are available, but they come at a premium. 2 : difficult to get because there is little available We bought bunk beds because space in the apartment is at a premium.

What is the difference between a premium and a rate?

A rate is the price per unit of insurance for each exposure unit, which is a unit of liability or property with similar characteristics. … The insurance premium is the rate multiplied by the number of units of protection purchased.

What is a premium discount?

What is a Premium or Discount? A premium or discount to the NAV occurs when the market price of an ETF on the exchange rises above or falls below its NAV. If the market price is higher than the NAV, the ETF is said to be trading at a “premium”. If the price is lower, it is trading at a “discount”.

What happens if my call option expires in the money?

You buy call options to make money when the stock price rises. If your call options expire in the money, you end up paying a higher price to purchase the stock than what you would have paid if you had bought the stock outright. You are also out the commission you paid to buy the option and the option’s premium cost.

What does premium quality mean?

The definition of premium is something or someone of greater or superior quality. An example of premium used as an adjective is the phrase premium gasoline which means a gasoline with a higher octane rating. adjective.