The Approximate Yield to Maturity of a Bond Is Greater

question 50

Multiple Choice

The approximate yield to maturity of a bond is greater than the stated rate of interest when the:

• A)bond is purchased at face value.
• B)bond is purchased at a discount.
• C)bond is purchased at a premium.
• D)market rates of interest decline.
• E)market rates of interest are constant.

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Definitions:

Total Cost

The aggregate amount of expenses incurred by a business in producing goods or services, including both fixed and variable costs.

Economic Profit

The variance between gross receipts and all outlays, including both tangible and intangible costs.

Accounting Profit

The total revenue of a business minus the explicit costs of operating, not including opportunity costs.

Implicit Costs

The opportunity costs that are not directly paid out but represent the loss of potential income from using resources in a certain way.