Question

Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the expected rate of return under certain assumptions. Which of the following is one of these assumptions?

a. The bond will not be called.
b. The bond has an early redemption feature.

Answer 1

Answer:

The bond will not be called.

Explanation:

The yield to maturity (YTM of, is the internal rate of return (overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond is held until maturity, and that the principal payments are made on schedule, it is equal to the current price of the bond.

YTM equals the expected rate of return under certain assumptions like the bond will not be called.