Q:
A:
All of the following are true concerning
the YieldtoMaturity (YTM) of a bond EXCEPT:
a) YTM is the promised rate of return an investor will receive from a bond at the current market price if held to maturity.
b) It is sometimes known as the dollarweighted return.
c) YTM assumes that the investor reinvests all coupons received from a bond at a rate equal to the computed YTM.
d) The premium or discount on the bond is not an important factor in the calculation of YTM.
a) YTM is the promised rate of return an investor will receive from a bond at the current market price if held to maturity.
b) It is sometimes known as the dollarweighted return.
c) YTM assumes that the investor reinvests all coupons received from a bond at a rate equal to the computed YTM.
d) The premium or discount on the bond is not an important factor in the calculation of YTM.
The correct answer is d):
YTM is the promised rate of return an investor will receive from a bond at the current market price if held to maturity. YTM takes into account the amount of the premium or discount (if any) and the time value of the investment. To calculate the YTM you must know the present value of the bond, future value, time to maturity, and the coupon rate. YTM is similar to the internal rate of return (IRR) it is also called dollarweighted return.
YTM is the promised rate of return an investor will receive from a bond at the current market price if held to maturity. YTM takes into account the amount of the premium or discount (if any) and the time value of the investment. To calculate the YTM you must know the present value of the bond, future value, time to maturity, and the coupon rate. YTM is similar to the internal rate of return (IRR) it is also called dollarweighted return.
MORE FAQS

On what basis does the sustainable growth rate fluctuate?

What is the difference between yield to maturity and the spot rate?

What does a negative bond yield mean?

What is the relationship between current yield and yield to maturity (YTM)?

How do I calculate yield in Excel?

What happens to the price of a premium bond as it approaches maturity?

Can the marginal propensity to consume ever be negative?

What is the difference between yield to maturity and the yield to call?

What causes a bond's price to rise?

Why is my bond worth less than face value?

What are the key factors that will cause a bond to trade as a premium bond?

Should investors focus more on the current yield or face value of a bond?

Should I include inflationprotected securities in my 401(k)?

What determines the price of a bond in the open market?

Can moving to a higher tax bracket cause me to have a lower net income?

How did the financial crisis affect the banking sector?

Do beneficiaries pay taxes on life insurance?

How do I become a Chartered Financial Analyst (CFA)?

What types of positions might a Chartered Financial Analyst (CFA) hold?

Can you invest in hedge funds?
RELATED FAQS

On what basis does the sustainable growth rate fluctuate?
Learn about the differences between the calculations for the yield to maturity and spot rate for determining the present ... 
What is the difference between yield to maturity and the spot rate?
Find out how yield to maturity and spot rate calculations use different discount rates to determine the present market value ... 
What does a negative bond yield mean?
Find out what it means when a bond has a negative yield and what circumstances must arise for the yield to be negative when ... 
What is the relationship between current yield and yield to maturity (YTM)?
Learn about the relationship between a bond's current yield and its yield to maturity, including how the market price of ... 
How do I calculate yield in Excel?
Learn about yield as it pertains to bonds and how to calculate this prospective valuation of an investment's total return ... 
What happens to the price of a premium bond as it approaches maturity?
Learn how bonds trade in regard to premiums and discounts, and how bond prices shift closer to par value as bonds approach ...
RELATED TERMS

Risk Discount
A situation where a particular investor, either an individual ... 
Discount Note
A shortterm debt obligation issued at a discount to par. Discount ... 
Average Price
1. A representative measure of a range of prices that is calculated ... 
Discount Bond
A bond that is issued for less than its par (or face) value, ... 
Running Yield
The annual income on an investment divided by its current market ... 
Bond
A debt investment in which an investor loans money to an entity ...