CFA Practice Question

CFA Practice Question

The yield to maturity
A. measures the expected rate of return on a bond if it is held to maturity.
B. measures the current income on a bond.
C. measures the cash flow on a bond.
Explanation: The yield to maturity (YTM) is the most widely used bond yield figure because it can indicate the fully compounded rate of return on a bond to an investor who purchases it at the market price. The promised yield to maturity will equal the actual realized yield if the investor holds the bond to maturity, and if he reinvests the interest income from the bond into investments that earn the same YTM rate.

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