Premium can mean several different things.
- In insurance, the premium is the payment that the insured pays to the insurer for the insurance policy. Insurers get to invest the premium in the interim until it (the insurer) actually has to pay out claims.
- In a closed-end fund (CEF), the premium or discount is the percentage by which the price exceeds or is less than the net asset value (NAV).
- In stock market theory, companies with reliable, predictable earnings growth are known as non-cyclical. They are supposed to trade at a premium to the average price earnings ratio (P/E) of the broad stock market.
- In value investing, a security is said to trade for a premium if it is trading for more than its intrinsic value.
- ln a bond trade, the premium or discount is the difference between the market price and call price or face value
Related Fool Articles
- Blue chip
- Call price
- Closed-end fund
- Face value
- Intrinsic value
- Market price