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:

Antibiotic

A type of medication used to treat bacterial infections by killing or inhibiting the growth of bacteria.

Analgesic

A type of medication that is used to relieve pain without causing loss of consciousness.

Antipyretic

A medication category aimed at lowering or avoiding fever.

Labyrinthitis

Inflammation of the inner ear, leading to vertigo and loss of hearing.