Which of the following is NOT a major risk premium component for bond investors?
A) quality differentials
B) term to maturity
C) indenture provisions
D) yield to maturity
E) exchange rate risk differences

Question

Quizplus · Accepted Answer

Yield to maturity is not a risk premium component; it is a measure of the total return expected on a bond if the bond is held until it matures, incorporating all payments from the bond including coupon payments and the return of principal, adjusted for the bond's current market price. Risk premiums, such as quality differentials, term to maturity, indenture provisions, and exchange rate risk differences, are additional returns demanded by investors to compensate for the risk associated with the bond, not measures of return like yield to maturity.

Which of the Following Is NOT a Major Risk Premium