Monday, January 13, 2014

why would someone buy a premium bond, if that means the YTM will be lower than a bond issued at par? and Looking south from CO-131. Bond, CO.

why would someone buy a premium bond, if that means the YTM will be lower than a bond issued at par?



help me understand this. Why would i pay 1200 for a bond that will have a lower ytm then a bond costing 800 with a higher ytm. Seems silly. Whatever bond has the highest ytm is the one i want....right?


Bond best answer:

Answer by sport mad
Not in my opinion. Premium bonds also offer the chance to win a £1million. Therefore your risk profile can alter your decision. Although a small probability of winning the £1m, it will be beneficial to some investors and a turnoff for others.


Bond

Looking south from CO-131. Bond, CO.
Bond

Image by tmac2272
Looking south from CO-131. Bond, CO.



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