- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 7. Yield and Yield Spread Measures for Fixed-Rate Bonds
- Subject 1. Periodicity and Annualized Yields

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**CFA Practice Question**

The yield to maturity is the rate that equates ______.

B. the present value of the expected cash flows with the purchase price

C. the present value of the reinvested income with the principal repayment

A. the present value of the expected cash flows with the principal repayment

B. the present value of the expected cash flows with the purchase price

C. the present value of the reinvested income with the principal repayment

Correct Answer: B

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**User Contributed Comments**
4

User |
Comment |
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danlan |
YTM considers coupon, reinvestment income, ... or in another word, the whole discounted cash flow. |

EminYus |
it considers the capital gain/loss too |

gill15 |
Confused with this. Isn't the Purchase price exactly the same as the principal? Or is principal value the maturity value? It must be otherwise it wouldnt make sense. I think I remember reading that before. |

johntan1979 |
gill15, the principal is the par value, which is repaid in full at maturity. |