The Current Yield Tends to Overstate a Bond's Total Return

question 81

Multiple Choice

The current yield tends to overstate a bond's total return when the bond sells for a premium because:

• A) the bond's price will decline each year.
• B) coupon payments can change at any time.
• C) bonds selling for a premium have low default risk.
• D) taxes must be paid on the current yield.

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Definitions:

Tolerance

The ability or willingness to tolerate something, in particular the existence of opinions or behavior that one does not necessarily agree with.

Dissociation

A psychological state in which a person feels disconnected from their thoughts, feelings, memories, or sense of identity, often a response to trauma or stress.

Consciousness

Consciousness refers to the state of being aware of and able to think about one's environment, thoughts, and experiences.

Social Acceptance

The degree to which an individual is accepted or regarded favorably by society or a social group.