What is a bond's yield to maturity (YTM)? A. The expected return you'll earn if the bond issuer defaults B. The return you have made if you sell the bond today C. The same as the bond's coupon rate D. The return you'll earn if you hold the bond to maturity and yields stay the same
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What is a bond's yield to maturity (YTM)?
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- The rate of return that you would earn if you bought a bond and held It to its maturity date is called the bond's yield to maturity (YTM). If Interest rates in the economy rise after a bond has been issued, what will happen to the bond's price and to Its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond's price? Briefly explain with necessary numerical data.What relationship between the required return (ytm) and the coupon interest will cause a bond to: a) Be priced at a discount¿ FALL2022 b) Be priced at a premium? c) Be priced at its par value?The rate of return that you would earn if you bought a bond and held it to its maturity date is called the bond’s yield to maturity, or YTM. If interest rates in the economy rise after a bond has been issued, what will happen to the bond’s price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond’s price?
- For the yield-to-maturity (YTM) to qual the actual compound return an investor realizes on an investment in a coupon bond, we must assume: O A. cash flows will be paid as promised. B. The bond will be held until maturity. C. cash flows will be reinvested at the YTM rate. D. All of the above.At maturity the bond holders get back their principal. The length of time is called a. Coupon O b. Face value O c. Bond's term O d. Bond's yieldThe yield to maturity on a bond with a price equal to its par value will Select one: a. Will depend upon the required return. b. Will be lower than the coupon rate. c. Always be equal to the coupon rate. d. Will be more than the coupon rate
- he yield that a bond will earn given that it is bought back by the issuer at the earliest possible date is the: Select one: a. current yield b. yield to maturity c. yield to put d. market yield e. yield to calld. As interest rate increases the value of a bond will ______________.e. If the bondholder’s required rate of return equals the coupon interest rate, the bondwill sell at _________.f. A premium bond sells for ____________ as maturity approaches.g. The discount bond sells for ____________ as maturity approaches.Investigating the principle that all bonds are priced to give the same total yield which is the current market rate of interest. REQUIRED: Create your own bond – i.e. the par value may be kept at 1000, but decide your own coupon rate, maturity period and current market rate of interest. Now compute your total yield which should consist of Current Yield plus Capital Gain/Loss Yield and find out if it equates the market rate of interest that you selected.
- Which of the following is correct? O If you pay a price above its face value to buy a bond, your return will be higher than its coupon rate. O When market rate is greater than coupon rate, the bond has a price below its face value. O When determining the value of a bond that payments semi-annual payments, one need to use semi-annual coupon rate to determine the coupon payments and semi-annual market rate as discount rate.1. Which of the following is correct? Group of answer choices 1. The lower the price you pay for a bond, the greater is your return. 2. A bond is overpriced when its value is greater than its price. 3. A fairly priced bond has a price equal to its face. 4. The value of a bond can be determined by the present value of all coupon payments and the present value of principal payment at maturity date.A bond’s expected return is sometimes estimated by its yield to maturity (YTM) and sometimes by its yield to call (YTC). The YTC is a better estimate when the bond sells at... a. a discount. b. a premium. c. par value.