A bond that you held to maturity had a realized return of 8 percent,but when you bought it,it had an expected return of 6 percent. If no default occurred,which one of the following must be true?
A)The bond was purchased at a premium to par.
B)The coupon rate was 8 percent.
C)The required return was greater than 6 percent.
D)The coupons were reinvested at a higher rate than expected.
E)The bond must have been a zero coupon bond.

Question

Quizplus · Accepted Answer

The realized return being higher than the expected return without default occurring suggests that the coupons received during the bond's term were reinvested at a rate higher than initially expected, leading to a higher overall return.

A Bond That You Held to Maturity Had a Realized