Forecasts Are Always Wrong and Therefore

question 31

Multiple Choice

Forecasts are always wrong and therefore

• A)should include both the expected value of the forecast and a measure of forecast error.
• B)should not include both the expected value of the forecast and a measure of forecast error.
• C)should only be used when there are no accurate estimates.
• D)should be missing the expected value of the forecast and a measure of forecast error.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until the maturity date, factoring in its current market price, par value, interest payments, and time to maturity.

Annual Coupon

The yearly interest paid to bondholders, typically expressed as a percentage of the bond's face value.

Market Yield

The annual income returned on an investment divided by its current market price.

Interest Rate Risk

The potential for loss due to a change in interest rates affecting investment values or borrowing costs.