premium

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Premium

(1) A bond sold above its par value. (2) The price of an option contract; also, in futures trading, the amount by which the futures price exceeds the price of the spot commodity. (3) For convertibles, amount by which the price of a convertible exceeds parity, and is usually expressed as a percentage. Suppose a stock is trading at $45, and the bond is convertible at a $50 stock price and the convertible bond trading at 105. A similar bond without the conversion feature trades at $90. In this case, the premium is $15, or 16.66%=(105-90)/90. If the premium is high, the bond trades like any fixed income bond; if low, like a stock. See: Gross parity, net parity. (4) For futures, excess of fair value of future over the spot index, which in theory will equal the Treasury bill yield for the period to expiration minus the expected dividend yield until the future's expiration. (5) For options, price of an option in the open market (sometimes refers to the portion of the price that exceeds parity). (6) For straight equity, price higher than that of the last sale or inside market. Related: Inverted market premium payback period. Also called break-even time; the time it takes to recover the premium per share of a convertible security.

Premium

1. The price by which a security, especially but not necessarily a bond, exceeds its face value.

2. The price of an option contract.

3. A payment that a policyholder makes, usually monthly, in order to be covered by an insurance policy.

4. The extra return that an investor expects to make from a position in exchange for accepting extra risk.

premium

1. The price at which an option trades. The size of the premium is affected by various factors including the time to expiration, interest rates, strike price, and the price and price volatility of the underlying asset. Also called option premium.
2. The amount by which a bond sells above its face value.
3. The excess by which a warrant trades above its theoretical value.
4. The amount by which a convertible bond sells above the price at which the same bond without the convertible feature would sell.

Premium.

A premium is the purchase price of an insurance policy or an annuity contract. You may pay the premium as a single lump sum, in regular monthly or quarterly installments, or in some cases on a flexible schedule over the term of the policy or contract.

When you pay over time, the premium may be fixed for the life of the policy, assuming the coverage remains the same. That's the case with many permanent life insurance policies.

With other types of coverage, the premium changes as you grow older or as costs for the issuing company increase.

Used in another sense, the term premium refers to the amount above face value that you pay to buy, or you receive from selling, an investment. For example, a corporate bond with a par value of $1,000 with a market price of $1,050 is selling at a $50 premium.

premium

  1. an addition to the published LIST PRICE of a product charged by a supplier to a customer. The premium could be charged for guaranteeing rapid delivery of the product, or could reflect the temporary scarcity of the product. A ‘premium price’ over similar products might be charged by a supplier who is able to convince buyers that his product is superior in some respect to competitors' offerings.
  2. the purchase of a BOND for more than its nominal value. The price which people are prepared to pay for a bond can be more than its nominal value if the nominal rate of interest on that bond exceeds current market interest rates.
  3. the sale of new STOCKS and SHARES at an enhanced price. In the UK this involves the issue of a new share at a price above its nominal value. Where shares have no nominal value it involves the sale of new shares above their current market price.
  4. the rating of a particular company's shares at a price above the average market price of the shares of other companies operating in the same sector, the ‘premium’ reflecting investors' general optimism that this company is likely to perform much better than the others.
  5. the amount by which a foreign currency's spot exchange rate stands above its ‘official’ par value under a FIXED EXCHANGE RATE system which allows some degree of short-term fluctuation either side of the par value.
  6. the annual payment made to an INSURANCE COMPANY by persons or firms taking out an insurance policy.

premium

  1. an addition to the published LIST PRICE of a good or service charged by a supplier to customers. The premium could be charged for express delivery of the product or could reflect the temporary scarcity of the product. A ‘premium price’ for a product over similar products might be charged by a supplier who is able to convince buyers that his product is superior in some respect to competitors’ offerings (see PRODUCT DIFFERENTIATION).
  2. the sale of new STOCKS and SHARES at an enhanced price. In the UK this involves the issue of a new share at a price above its nominal value. In other countries where shares have no nominal value it involves the sale of new shares above their current market price.
  3. the purchase of a particular company's issued stock or share at a price above the average market price of those of other companies operating in the same area. The price is higher, reflecting investors’ optimism about that company's prospects.
  4. a general rise in the prices of all stocks and shares to higher levels in anticipation of an upturn in the economy.
  5. the purchase of a BOND for more than its nominal value. The price that people are prepared to pay for a bond can be more than its nominal value if the nominal rate of interest on that bond exceeds current market interest rates.
  6. the extent to which a foreign currency's market EXCHANGE RATE rises above its official exchange rate under a FIXED EXCHANGE RATE SYSTEM.
  7. the annual payment made to an INSURANCE COMPANY for an insurance policy. See also SPECULATIVE DEMAND FOR MONEY.

premium

(1) An amount paid for an insurance policy.(2) An advance payment of several months or even years of rent to a landlord.(3) The value of a mortgage in excess of its face value.For example,if a $100,000 mortgage cannot be prepaid and is bearing interest at 10 percent when prevailing interest rates are only 6 percent, an investor might pay more than $100,000 to buy the mortgage because of the high return.

References in periodicals archive ?
To report a scam or check a premium rate number that appears on your bill, call 0800 500212 or visit the Icstis website at www.
It has the power to fine and even close down companies which con people into using premium rate numbers.
The company which owns the premium rate number for the web site, New York-based BW Telecom, was fined pounds 75,000 for breaches of the industry code of practice.
The authority also had a responsibility to look at all aspects of the proposal including the possibility of income generation from a premium rate line.
The safest approach, however, is for CPAs to help clients develop an exit strategy they can implement before there is excess policy equity or before the insured's age and premium rates make the income and gift tax consequences prohibitive.
This testimony focuses on the factors that have contributed to the recent increases in insurance premium rates and the differences in rates among states that have passed varying levels of tort reform laws.
This is the first premium rate cut since the deposit insurance system was created in 1971.
But the service, which simply provided commonsense tips including how to open bank accounts, did not tell customers that the premium rate calls would last for more than 25 minutes - costing pounds 25.
One MP said: "Most high premium rate numbers that have been dialled were for sex chat lines.
A deposit insurance premium rate determined by Merton's model cannot be fairly priced according to the multiperiod model.
Premium rate SMS regulations (the Mobile Premium Service Code) were introduced to address the bill-shock problems produced by these high charges, but in some cases this has only made matters worse.
Royal Bank of Scotland Group plc and Barclays plc have promised to eliminate premium rate phone lines for clients services and problems.