What Formula Measure Would an Investor Use to Calculate the Yield

question 19

Multiple Choice

What formula measure would an investor use to calculate the yield on a 20-year bond with 10 years to maturity, if he or she only intends to hold the bond for 5 years?

• A)Anticipated realized yield
• B)Yield to call
• C)Current yield
• D)Yield to maturity
• E)Any one of the above will measure the yield

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Definitions:

Financial Crisis

A situation where the value of financial institutions or assets drops rapidly, leading to a loss of confidence in the financial system, possible bank runs, and reduced lending and spending.

Adverse Selection

A market process in which unwanted results occur when buyers and sellers have asymmetric information, typically resulting in high-quality goods or services being driven out of the market.

Insured Drivers

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Moral Hazard

A situation in economics where one party takes more risks because they know another party bears the cost of those risks.