Keyword Analysis & Research: premium

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Frequently Asked Questions

What is premium?

The difference between the price paid for a fixed-income security and the security's face amount at issue is referred to as a premium if that price is higher than par. The purchase price of an insurance policy or the regular payments required by an insurer to provide coverage for a defined period of time.

What does it mean when a stock is at a premium?

Something trading at a premium might also signal it is over-valued. Broadly speaking, a premium is a price paid for above and beyond some basic or intrinsic value. Relatedly, it is the price paid for protection from a loss, hazard, or harm (e.g., insurance or options contracts).

What is a bond price premium?

The concept of a bond price premium is directly related to the principle that the price of a bond is inversely related to interest rates; if a fixed-income security is purchased at a premium, this means that then-current interest rates are lower than the coupon rate of the bond.

What does it mean to trade at a premium?

Generically, a security trading above its intrinsic or theoretical value is trading at a premium (in contrast to a discount ). The difference between the price paid for a fixed-income security and the security's face amount at issue is referred to as a premium if that price is higher than par.


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