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

question 114

Multiple Choice

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

• A)Increases in interest rates will increase the current yield
• B)The bond's price will increase each year
• C)Current yields only show nominal returns
• D)The bond may have a higher face value

Analyze and calculate asset depreciation using various methods such as straight-line, double-declining balance, and units-of-production.

Recognize the impact of not recording amortization or depreciation expenses on financial statements.

Understand the differentiation between capital and revenue expenditures and the impact on asset valuation.

Identify and account for impairment losses on assets and their effect on financial statements.

---

Definitions:

Liabilities

Financial obligations or debts a company owes to others, payable in money, goods, or services.

Owner's Equity

The residual interest in the assets of an enterprise after deducting its liabilities.

Assets

Resources owned or controlled by a company that are expected to provide economic benefits or value in the future.

Expenses

Costs incurred by a business in the process of earning revenue, such as salaries, rent, and utilities.