The yield to maturity on a bond is: A. fixed in the indetenture B. lower for the
ID: 2666419 • Letter: T
Question
The yield to maturity on a bond is:A. fixed in the indetenture B. lower for the higher risk bond C. the required rate of return on the bond or D. generally below the coupon interest rate
A bond's yield to maturity depends on all of the following except:
A. the maturity of the bond B. the coupon rate C. the individual investor's required rate of return or D. the bond's risk as reflected by the bond rating
A bond will sell at a discount (below par value) if:
A. The economy is booming B. Current market interest rates are moving in the same direction as bond values C. The market value of the bond is less than the present value of the discount rate of the bond or D. Investor's current required rate of return is above the coupon rate of the bond.
Thanks for the help.
Explanation / Answer
The yield to maturity on a bond is: C. the required rate of return on the bond or The rate of return anticipated on a bond if it is held until the maturity date. YTM is considered a long-term bond yield expressed as an annual rate. The calculation of YTM takes into account the current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupons are reinvested at the same rate. A bond's yield to maturity depends on all of the following except: D. the bond's risk as reflected by the bond rating A bond will sell at a discount (below par value) if: D. Investor's current required rate of return is above the coupon rate of the bond.
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