CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

The ______ must be reinvested at the ______ to earn the expected yield to maturity.

A. capital gain; current market rate
B. coupon payments; yield to maturity
C. coupon payments; current market rate
Correct Answer: B

User Contributed Comments 3

User Comment
Cfrey This is only if a bond isn't bought a premium/discount correct?
ascruggs92 This is in all cases. Time Value calculations assume coupon payments are immediately reinvested at the prevailing rate of return.
khalifa92 another perspective;
yield to maturity is the internal rate of return (IRR) that equalize the discounted cash flows to present value.
the IRR takes into account the reinvestment assumption!
You need to log in first to add your comment.