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

question 63

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:

Corpus Luteum

A temporary endocrine structure in female ovaries that produces progesterone to regulate the menstrual cycle and early pregnancy.

LH

Luteinizing Hormone, a hormone that triggers ovulation in females and testosterone production in males.

ACTH

Adrenocorticotropic hormone, a pituitary gland hormone that stimulates the production of cortisol by the adrenal cortex.

Uterine Cycle

The monthly cycle of changes in the uterus, including menstruation and the development of the endometrium, in preparation for possible pregnancy.