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Accounting
Bond Premium
The extra amount investors pay when a bond's stated interest rate is higher than current market rates.
Bond premium is recorded as a liability add-on and then amortized over the life of the bond, reducing the interest expense each period.It's like paying $110 for a $100 gift card because the card gives you better rewards than anything else available.
Real world: A company issues $100,000 bonds with 6% interest when the market only offers 4% — investors happily pay $108,000, creating an $8,000 premium.
💡 A bond premium means the company got a great deal on borrowing — it effectively lowers the real interest cost over time.