A bond selling at a premium:

A bond selling at a premium indicates that its market price is higher than its face value, which typically occurs when the bond's coupon rate is above current market interest rates. This means that the bond's interest payments are more attractive compared to new issues, leading investors to pay more for it.

When a bond is trading at a premium, it is frequently viewed as a candidate for being called by the issuer, particularly if interest rates decline. Issuers benefit from calling a premium bond because they can refinance their debt at a lower interest rate, which reduces their borrowing costs. Therefore, if market conditions favor such action (i.e., lower rates), the likelihood of the bond being called increases.

The other choices either do not align with the characteristics of a premium bond or address factors unrelated to its trading status. Bonds can have a yield to maturity regardless of whether they are selling at a premium or discount, and while high-quality bonds might sell at a premium due to their reliability, that is not a defining characteristic of all premium bonds. Thus, recognizing that a bond selling at a premium is indeed likely to be called is a fundamental aspect of understanding bond market dynamics.