Which of the Following Statements Is CORRECT

question 80

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 is 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,and its expected capital gains yield is zero.
• 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:

Stock Price

The cost of purchasing a share of a company's stock on the open market.

Constant Growth Rate

A stable rate at which a company's dividends or earnings are expected to grow over time, often used in valuation models.

Required Return

The lowest profit an investor anticipates making from an investment in a specific asset, considering its associated risk.

Required Rate of Return

A rephrased definition; the minimum percentage of return investors demand from an investment to compensate for its risk.