Final answer:
The magnitude of a bond's premium will indeed change as the security's value and remaining time to maturity alter. This is because market interest rates, perceptions of credit risk, and the proximity of the bond's maturity date all impact the bond's market price.
Step-by-step explanation:
The statement that the magnitude of the premium will change as both the securities value, and remaining time to maturity changes is true. The premium of a bond is the amount by which its market price exceeds its face value. This can occur for various reasons, including changes in interest rates or credit risk perceptions. As market interest rates change, the required return on a bond will change, leading to a fluctuating premium for newly issued bonds as well as existing ones. For example, if market interest rates rise, bonds with lower coupon rates become less attractive, potentially causing their market prices to drop below par value, creating a discount rather than a premium. The premium will also change as the time to maturity decreases because bonds tend to approach their face value as the maturity date approaches, assuming no default risk.