How Can a Bond Have a Negative Rate of Return

question 94

Multiple Choice

How can a bond have a negative rate of return?

• A) if the current yield is greater than the coupon rate
• B) if the current yield is less than the coupon rate
• C) if the rate of capital loss exceeds the current yield
• D) if the rate of capital gains is less than the current yield

---

Definitions:

Risk-Averse Investor

An individual who prefers lower returns with known risks rather than higher returns with unknown risks.

Variances

Variances measure the dispersion of a set of data points around their mean value, identifying how spread out the data points are.

Risky Asset

An investment that has a significant degree of uncertainty regarding its future returns, potentially leading to losses as well as gains.

Standard Deviation

A measure of the amount of variability or dispersion in a set of data points, indicating how much individual data points deviate from the mean.