Which of the Following Statements Regarding Bonds and Their Terms

question 56

Multiple Choice

Which of the following statements regarding bonds and their terms is FALSE?

• A) The internal rate of return (IR
• R) of an investment in a zero-coupon bond is the rate of return that investors will earn on their money if they buy a default-free bond at its current price and hold it to maturity.
• B) The yield to maturity of a bond is the discount rate that sets the future value (F
• V) of the promised bond payments equal to the current market price of the bond.
• C) Financial professionals also use the term spot interest rates to refer to the default-free zero-coupon yields.
• D) When we calculate a bond's yield to maturity by solving the formula, Price of an n-period bond = + + ... + , The yield we compute will be a rate per coupon interval.

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