For Simple Loans, the Yield to Maturity

question 41

Multiple Choice

For simple loans, the yield to maturity

• A)is always less than the specified simple interest rate.
• B)is always greater than the specified simple interest rate.
• C)is always equal to the specified simple interest rate.
• D)may be less than, greater than, or equal to the specified simple interest rate, depending on the maturity of the loan.

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Definitions:

Covariance

A measure used in statistics and finance to assess how changes in one variable are associated with changes in another variable.

Canadian Stock Market

A financial market in Canada where securities, equities, bonds, and other financial instruments are traded.

Risk-free Rate

The expected return from an investment that carries no risk of losing money, commonly indicated by the interest rate on treasury securities.

Forward Rate

An agreed-upon interest rate for a loan or investment to be initiated in the future, used in forward contracts and financial planning.