What is better in terms of investing? Do only bonds sell at discounts and premiums?
2007-09-06 13:57:14 · 4 answers · asked by Anonymous in Business & Finance ➔ Investing
What's the advantage or disadvantage though of buying a bond at a premium or discount?
2007-09-06 14:18:33 · update #1
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2007-09-06 15:35:58 · answer #1 · answered by Anonymous · 0⤊ 0⤋
A bond pays a fixed amount at maturity. Before then, the bond can trade above or below this amount, depending on the interest paid. If the bond pays high interest, then the bond will trade at a premium, and the extra interest makes up for the extra amount paid over maturity value. There is no advantage or disadvantage. You could have 2 bonds that mature for $1000, one costs $800 and the other $1200, but both will yield about 6% to maturity based on the interest rate paid by the bond. If you dont understand this however, you should not be investing in individual bonds.
2007-09-06 21:21:46 · answer #2 · answered by The Joe 3 · 0⤊ 1⤋
There is no "advantage". Bonds are sold at a discount or premium to reflect the current market rates.
2007-09-06 23:44:45 · answer #3 · answered by Common Sense 7 · 0⤊ 0⤋
Discount=Below face value
Premium=Above face value
CD's also trade on the secondary market at discounts and premiums.
Most other investments do not have a face value.
2007-09-06 21:10:15 · answer #4 · answered by StephenWeinstein 7 · 0⤊ 0⤋