Which type of bond is purchased for more than its par value?

A premium bond is one that is purchased for more than its par value. This situation typically occurs when the bond’s coupon rate is higher than current market interest rates. Investors are willing to pay a premium because the bond's interest payments (coupons) are more attractive compared to the rates being offered on new issues in the market.

When a bond is sold at a premium, it reflects the higher income investors can expect from holding the bond. Generally, as interest rates rise in the market, existing bonds with lower rates become less attractive, leading to them being sold at a discount. Conversely, if a bond is sold at a premium, it indicates that it is in demand because it generates more income than what is currently available.

Understanding this concept is crucial for investors as it impacts the overall return on investment. Considering the other options, a discount bond is sold below par value, which is the opposite of a premium bond. Yield bonds do not specifically refer to a scenario of purchasing above par value, and zero-coupon bonds typically do not have periodic interest payments and are issued at a discount, maturing at par value.