The Yield to Maturity on a Bond Is

question 57

Multiple Choice

The yield to maturity on a bond is

• A) below the coupon rate when the bond sells at a discount and equal to the coupon rate when the bond sells at a premium.
• B) the discount rate that will set the present value of the payments equal to the bond price.
• C) based on the assumption that any payments received are reinvested at the coupon rate.
• D) None of the options are correct.

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Definitions:

Fiscal Year

A one-year period used for financial reporting and budgeting, which may not necessarily align with the calendar year.

Journal Entry

A record in accounting that represents a transaction and its effect on various accounts, ensuring the debits equal the credits.

Present Value

The current value of a future amount of money or stream of cash flows given a specified rate of return.

Compound Interest

This approach to interest calculation includes both the initial principal amount and the compounded interest from earlier stages of a deposit or borrowing.