Amortizable Premium Law and Legal Definition

Amortizable premium is a premium paid for a bond, debenture, note, certificate, or other evidence of indebtedness which bears interest and is issued by a corporation, government, or political subdivision, including both registered and unregistered bonds.

Where bonds are purchased by a trustee at a premium, the amount paid as premium is commonly amortized by deducting from each interest or coupon payment on the bonds equal installments sufficient in amount in the aggregate to bring the purchase price of the bonds to par at maturity, paying only the balance of each such payment to the cestui que trust. [Old Colony Trust Co. v. Comstock, 290 Mass. 377, 379 (Mass. 1935)].