What Is the Relationship Between a Bondholder's Rate of Return

question 76

Multiple Choice

What is the relationship between a bondholder's rate of return and the bond's yield to maturity if he does not hold the bond until it matures?

• A)the rate of return will be lower than the yield to maturity.
• B)the rate of return will be higher than the yield to maturity.
• C)the rate of return will equal the yield to maturity.
• D)there is no predetermined relationship between the rate of return and the yield to maturity.

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Definitions:

Consumer Price Index

An economic indicator that measures the average change over time in the prices paid by consumers for a basket of goods and services.

Basket's Cost

The total expense of a selected set of goods and services over a period, often used to measure inflation.

Base Year

A reference year used for comparative financial analysis in which indices or prices are normalized to 100.

Consumer Price Index

A scale that quantifies the average alteration over time in the prices that urban buyers allocate for a specific group of consumer products and services.