Bond Trading at a premium and loss incurred

Could anyone explain me this statement that “bond trading at a premium loss in the event of default is likely to be larger”?

What are your thoughts on it?

Thanks. I have understood reasoning behind the loss. The reasoning is that since we have bought bond at premium and if the defaults occurs then it will lead to a loss.

But why will the loss be “larger”?

Because we bought at a premium and paid higher price.


1 Like