# How to Calculate the Interest on Bonds Issued at a Premium i Thinkstock/Comstock/Getty Images

When a bond is issued at a premium, its price is higher than the amount it pays at maturity. This bond costs so much because it offers a higher interest rate than comparable investments, and its high returns increase demand for the bond. For comparison, if a bond offers a lower rate than comparable investments, its demand drops, so it sells for a discount. To find a bond's interest rate from its premium, you need a physical or online financial calculator.

## Step 1

Add the bond's premium to its face value to calculate its price. For example, if a \$2,000 bond is issued at a premium of \$1,000, add \$1,000 to \$2,000 to get \$3,000.

## Step 2

Type the bond's price into a financial calculator and then press "FV." With this example, type "3000."

## Step 3

Type the bond's face value into the calculator and then press "PV." With this example, type "2000."

## Step 4

Type the amount that the bond pays each year as its coupon, and then press the "PMT" key. For example, if the bond issuer offers to pay you \$150 annually as a coupon, type "150."

## Step 5

Type the number of years until the bond matures and then press the "N" key. For example, if the bond will mature in 3 years, type "3."

## Step 6

Press the "compute" key and then press "i" to find the bond's internal interest rate. With this example, the \$2,000 bond with a \$1,000 premium offers an interest rate of 7.9 percent.