2

I'm trying to understand bonds. I'm wondering if it is impossible to have a bond considered premium (or discount) if it is held for it's full maturity?

Improve this question

1 Answer 1

Reset to default
1

If a bond is selling for more than its par value then it's sold at a premium. If it's sold for less then it's sold at a discount. Whether the holder intends to hold it to maturity or not is irrelevant.

If you're asking if a bond you already own can change from premium to discount (or vice-versa) then no, it matters what you bought it for. If you bought a bond for $102 and now it's selling for $98, you bought it at a premium, so any accounting or tax ramifications of buying a bond at a premium should stay in place.

Improve this answer
8
  • I'm wondering if there is such a thing as a 1-yr premium or discount bond if you bought and sold at par, and at maturity?
    – skube
    Jul 3, 2017 at 18:44
  • I'm not sure what you're asking, a bond bought at par is neither premium or discount, regardless of the length of the bond. Is there a specific problem you're trying to solve or are you just trying to understand terminology?
    – D Stanley
    Jul 3, 2017 at 18:45
  • Just trying to understand terminology and concepts. A bond bought at par is neither, but can be sold at a premium or discount?
    – skube
    Jul 3, 2017 at 18:48
  • Correct. Premium and discount just describe whether the bond is selling over or under its par value.
    – D Stanley
    Jul 3, 2017 at 18:56
  • 1
    Absolutely - any bond can be sold at a premium or discount. The market price depends on the coupons it pays and the credit risk of the issuer. Whether you hold it to maturity or not (from your original question) is irrelevant.
    – D Stanley
    Jul 3, 2017 at 19:01

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.