Which of the Following Statements Is CORRECT

question 17

Multiple Choice

Which of the following statements is CORRECT?

• A)If a bond is selling at a discount, the yield to call is a better measure of return than the yield to maturity.
• B)On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.
• C)On an expected yield basis, the expected current yield will always be positive because an investor would not purchase a bond that is not expected to pay any cash coupon interest.
• D)If a coupon bond is selling at par, its current yield equals its yield to maturity.
• E)The current yield on Bond A exceeds the current yield on Bond B; therefore, Bond A must have a higher yield to maturity than Bond B.

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Definitions:

Charging Interest

The act of lending money or capital with the expectation of receiving payment back plus additional money, known as interest, which serves as the cost of borrowing.

Corporate Profits

Corporate profits denote the earnings of a company after all expenses, taxes, and costs have been subtracted from total revenue.

Proprietors' Profits

The earnings retained by the owners after all expenses have been deducted from the gross income of an unincorporated business.

National Income

The total value of all income earned by the residents of a country in a given period, including wages, profits, and investment returns.