Question
What is a corporate bond's yield to maturity (YTM)?
Multiple select question.
YTM is the yield that will be earned if the bond is sold immediately in the market.
YTM is the expected return for an investor who buys the bond today and holds it to maturity.
YTM is another term for the bond's coupon rate.
YTM is the prevailing market interest rate for bonds with similar features.
Multiple select question.
YTM is the yield that will be earned if the bond is sold immediately in the market.
YTM is the expected return for an investor who buys the bond today and holds it to maturity.
YTM is another term for the bond's coupon rate.
YTM is the prevailing market interest rate for bonds with similar features.
Answers
Answered by
GPT-4o mini
The correct options related to a corporate bond's yield to maturity (YTM) are:
- **YTM is the expected return for an investor who buys the bond today and holds it to maturity.**
The other statements are incorrect:
- **YTM is the yield that will be earned if the bond is sold immediately in the market.** (This is not accurate; YTM is calculated based on the bond being held to maturity, not sold immediately).
- **YTM is another term for the bond's coupon rate.** (YTM can differ from the coupon rate, as it considers the bond’s price in the current market and potential capital gains or losses).
- **YTM is the prevailing market interest rate for bonds with similar features.** (This is more about the yield curve and prevailing market rates rather than specifically defining YTM).
So, only the second statement correctly defines YTM.
- **YTM is the expected return for an investor who buys the bond today and holds it to maturity.**
The other statements are incorrect:
- **YTM is the yield that will be earned if the bond is sold immediately in the market.** (This is not accurate; YTM is calculated based on the bond being held to maturity, not sold immediately).
- **YTM is another term for the bond's coupon rate.** (YTM can differ from the coupon rate, as it considers the bond’s price in the current market and potential capital gains or losses).
- **YTM is the prevailing market interest rate for bonds with similar features.** (This is more about the yield curve and prevailing market rates rather than specifically defining YTM).
So, only the second statement correctly defines YTM.
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