The yield to maturity:
A)that is expected will be realized any time a bond is sold.
B)will exceed the coupon rate when the bond is selling at a premium.
C)equals the current yield for all annual coupon bonds.
D)can only be realized if a bond is purchased on the issue date at par value.
E)equals both the current yield and the coupon rate for par value bonds.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) equals both the current yield and the coupon rate for par value bonds because when a bond is purchased at its par (or face) value, the interest income (coupon payments) received by the investor is exactly what is needed to match the bond's initial cost over its remaining life, assuming all payments are made as scheduled and reinvested at the same rate.

The Yield to Maturity