Discounts and premium makes investing on a company rewarding Essay- Discounts and premium makes investing on a company rewarding Essay introduction.
Discounts and premium makes investing on a company rewarding. When one trades at a discount, the profit is higher. This is because the dividends are being calculated based on the net asset value. The net asset value on the other hand increases its value if the market condition is good. As such, more investors are then attracted to it, increasing the demand for it. An increase in the demand, on the other hand, allows the market value to increase and be traded at its premium. Because of this it is possible that the investor who have bought it at a discount rate could then sell his share based on the prevailing value in the market. This would mean a considerable increase in profits.
Trading also at a discount is able to attract an investor to buy up all the existing funds at a discounted price. This implies that he will be able to take control of it. As such, it would be able tot liquidate it at a higher price since a fewer share in the market is available in the market.
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