- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 1. Bond Prices and the Time Value of Money

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**CFA Practice Question**

Which yield measure is the internal rate of return that makes the present value of cash flows equal to the bond price?

B. Yield-to-maturity

C. Spot rate

A. Market discount rate

B. Yield-to-maturity

C. Spot rate

Correct Answer: B

Yield-to-maturity is the promised rate of return.

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**User Contributed Comments**
2

User |
Comment |
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brookew |
what's the difference between YTM and market discount rate? I thought YTM was a market discount rate since it is in the denominator of DCF models |

khalifa92 |
YTM= IRR that makes discounted cash flows = bond price r = required market interest rate for a given risk. |