• The length of time it takes to recover the initial cost of a project, without regard to the time value of money.
| ||Embedded terms in definition|
| ||Time value of money|
| ||Referenced Terms|
| ||Break even time: Related: Premium Payback period.|
| ||Discounted payback period rule: An investment decision rule in which the cash flows are discounted at an interest rate and the Payback rule is applied on these discounted cash flows.|
| ||Fish and bait test: A description for the Payback period since it concentrates on recovering the bait (the initial investment) paying no attention to the size of the fish (Present Value of all cash inflows).|
| ||Premium: (1) Amount paid for a bond above the par value. (2) The price of an option contract; also, in futures trading, the amount the futures price exceeds the price of the spot commodity. Related: inverted market premium Payback period. Also called break-even time, the time it takes to recover the premium per share of a convertible security.The difference between the par value of a bond and the cost of the bond, when the cost is above par.The amount by which a bond sells at a value that is greater than its par, or face, value.(1) The amount by which the price at which an issue is trading exceeds the issue's par value. (2) The amount that must be paid in excess of par to call or refund an issue before maturity. (3) In money market parlance, the fact that a particular bank's CDs trade at a rate higher than others of its class, or that a bank has to pay up to acquire funds.The fee paid to an insurance company in exchange for protection against a specified risk (for an insurance policy); the amount by which the sale price of a bond exceeds its face value.(1) The amount of cash that an option buyer pays to an option seller. (2) The difference between the higher price paid for a security and the security's face amount at issue. See also: Discount.Is used several ways. It can refer to the value of an option, the amount that a credit instrument is trading over par, or the price differential due to quality or location characteristics for commodities.|
| ||Related Terms|
| ||Discounted payback period rule|
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