The yield to maturity is:
A)the rate that equates the price of the bond with the discounted cash flows.
B)the expected rate to be earned if held to maturity.
C)the rate that is used to determine the market price of the bond.
D)equal to the current yield for bonds priced at par.
E)All of the above.

Question

Quizplus · Accepted Answer

The yield to maturity takes into account the price of the bond and its discounted cash flows, so A is correct. It is also the expected rate to be earned if held to maturity, making B correct. Additionally, it is used in determining the market price of the bond, so C is also correct. Finally, for bonds priced at par, the current yield would be the same as the yield to maturity, so D is also true. Therefore, all of the options are correct.

The Yield to Maturity Is