The correct answer is: B. premium bond
A premium bond is a bond that is issued at a price above its face value. This means that the investor pays more for the bond than its face value, which is the amount that will be repaid to the investor when the bond matures.
There are a few reasons why an investor might buy a premium bond. One reason is that they believe that the bond will appreciate in value over time. This could happen if interest rates fall, as the bond will then have a higher yield than other bonds with similar maturities. Another reason is that the investor may be looking for a way to lock in a higher interest rate. This could be the case if they believe that interest rates are going to rise in the future.
Premium bonds can be a good investment for investors who are looking for a way to generate income or to protect their capital from inflation. However, it is important to remember that all investments carry risk, and investors should always do their research before investing in any type of bond.
Here is a brief explanation of each option:
- A. premium face value: This is not a valid option. The face value of a bond is the amount that will be repaid to the investor when the bond matures.
- B. premium bond: A premium bond is a bond that is issued at a price above its face value.
- C. premium stock: A premium stock is a stock that is issued at a price above its par value.
- D. premium warrants: A premium warrant is a warrant that is issued at a price above its exercise price.