[amp_mcq option1=”yield to maturity” option2=”yield to call” option3=”yield to earning” option4=”yield to investors” correct=”option1″]<\/p>\n
The correct answer is A. yield to maturity.<\/p>\n
Yield to maturity (YTM) is the annual rate of return an investor expects to earn on a bond if they hold it until maturity. It is calculated by taking the present value of all the bond’s future cash flows (coupon payments and principal repayment) and dividing it by the bond’s price.<\/p>\n
If the yield to maturity is below the coupon rate, it means that the bond is selling at a discount. This can happen for a number of reasons, such as if the bond is perceived to be risky or if interest rates have risen since the bond was issued.<\/p>\n
Investors who buy a bond at a discount will earn a higher yield to maturity than the coupon rate. This is because they will receive the bond’s coupon payments at a higher rate than they paid for the bond.<\/p>\n
For example, if a bond with a face value of $1,000 and a coupon rate of 5% is selling at a discount of $50, the investor will pay $950 for the bond. The investor will then receive $50 in coupon payments each year for the next 10 years, and they will receive the $1,000 principal payment at the end of the 10 years. The yield to maturity on this bond is 5.26%.<\/p>\n
The other options are incorrect because they do not accurately describe the yield of a bond that is selling at a discount.<\/p>\n
[amp_mcq option1=”yield to maturity” option2=”yield to call” option3=”yield to earning” option4=”yield to investors” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-57782","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n