The promised yield to maturity calculation assumes that
A) all coupon interest payments are reinvested at the current market interest rate for the bond.
B) all coupon interest payments are reinvested at the coupon interest rate for the bond.
C) all coupon interest payments are reinvested at short-term money market interest rates.
D) all coupon interest payments are not reinvested.
E) None of these are correct.

Question

Quizplus · Accepted Answer

The promised yield to maturity assumes that all coupon interest payments are reinvested at the current market interest rate for the bond. This ensures that the total return from the bond reflects both the coupon payments and any capital gain/loss from changes in market interest rates.

The Promised Yield to Maturity Calculation Assumes That