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Premium |
| A price on a bond above par, or 100, and the opposite of a discount. All things being equal, the higher the coupon of a bond, the higher the price, and therefore the greater the potential premium. Many investors will not invest in bonds with premium prices; they are concerned with the principal loss that is realized over the life of the bond, but fail to take into account the higher income that will be earned. Bond investors can easily compare bonds with varying prices and coupons using the yield-to-maturity calculation to estimate a bond's expected total return. |