At a Premium - Explained
What is At a Premium?
Written by J. Mance Gordon
Updated at April 22nd, 2024
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What is At A Premium?
At a premium is a term that describes a condition in which an item has a higher price because it is valuable, many people want it, but it is scarce. In asset valuation at a premium describes a situation where the current value of an asset is more than its intrinsic or fundamental value. An item or asset that is at a premium is its value is in excess, therefore, it is held in high esteem by individuals.
How Does at a Premium Work?
Here are situations that clearly depicts the phrase at a premium;
- A callable bond that is trading at a premium to its par value means it has additional value which is above its face value.
- If share of Company XYZ are trading at a premium to the shares of Company ABC, it means the shares of the former company have excess value when compared to the shares of the other company.
- A closed-end fund trading at a premium is trading at a price higher than its NAV )net asset value).
- If the product of a company is priced at a premium, it is priced at a higher value than other products from other companies.