The ________ is used to determine the annual or semi-annual interest cash flow for a bond whereas the ________ is the rate used to determine the price of the bond.
A)coupon rate; yield to maturity
B)yield to maturity; coupon rate
C)yield to maturity; discount rate
D)current yield; yield to maturity

Question

Quizplus · Accepted Answer

The coupon rate determines the annual or semi-annual interest payments that are made to bondholders. Yield to maturity, on the other hand, measures the total return that an investor can expect from a bond if held until maturity, and takes into account the bond's price, coupon payments and time to maturity. Therefore, the correct answer is option A, with coupon rate determining the interest cash flow, and yield to maturity being used to calculate the bond price.

The ________ Is Used to Determine the Annual or Semi-Annual