A bond premium can be considered to be
A)an increase in the borrowing cost.
B)a reduction in borrowing cost.
C)unrelated to the borrowing cost.
D)a contra-liability.

Question

Quizplus · Accepted Answer

A bond premium is the amount by which the price of a bond exceeds its face value. This means that the bond is being sold at a higher price than the amount borrowed. As a result, the issuer of the bond receives more money than they would have if the bond had been issued at face value. This extra amount can be used to reduce the effective cost of borrowing, making it a reduction in borrowing cost.

A Bond Premium Can Be Considered to Be