Premium

Premium can mean several different things.

1. In insurance, the premium is the payment that the insured pays to the insurer for the insurance policy.
2. 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).
3. 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.
4. In value investing, a security is said to trade for a premium if it is trading for more than its intrinsic value.
5. ln a bond trade, the premium or discount is the difference between the market price and call price or face value

Related Fool Articles

• What factors affect my auto premium?
• Closed-End Funds: Skip the Premium

Related Terms

• Blue chip
• Bond
• Call price
• Closed-end fund
• Discount
• Face value
• Insurance
• Intrinsic value
• Market price

Recent Mentions on Fool.com

• These Tech Stocks Will Make Me Rich (GOOG)
• Bottling Up Beer Investors (ABV, BUD, FMX, KOF)
• 5-Star Stocks Worth a Look (DEO)
• eBay Is $2 Billion Richer! (EBAY)
• Can salesforce.com Talk Its Way to Bigger Profits? (CRM)
• Gold's Bull Run Is Only Beginning