At A Premium

What does 'At A Premium' mean

At a premium is the sale of an asset or item at a price significantly above the original purchase price due to high demand, rather than appreciation. At a premium, when used to refer to the cost of an asset, can indicate its increased price and limited supply. Changes in market interest rates, superior performance and limited supply, are examples of factors that can cause an investment to be in high demand and to trade at a premium.

BREAKING DOWN 'At A Premium'

For example, sold-out concert or sporting-event tickets may be sold at a premium, at a price above their face value, in the secondary market. A bond that is paying a higher rate of interest than current market rates could also be sold at a premium to its face value, because investors will pay more to earn more interest. In the opposite situation, a bond that pays interest below current market rates would be sold at a discount to its face value.

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    When the terms premium and discount are used in reference to bonds, they are telling investors that the purchase price of ... Read Answer >>
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