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Which of the following statements are correct concerning yield-to-maturity (YTM)?
a.YTM considers both interest income and price appreciation.
b.YTM assumes the bond is called at the earliest possible date.
c.YTM is a compounded rate of return.
d.YTM assumes all interest payments are reinvested at the YTM rate.

Respuesta :

Answer: Options (A), (C) and (D) are correct

Explanation:

Yield to maturity ,is referred to as or known as theoretical IRR or internal rate of return that is earned by a person or investor who tends to buy that bond at the respective market price, also assuming the bond is enclosed till maturity, and further knowing that coupon and other principal payments are to be made on the schedule. YTM is referred to as or known as discount rate on which sum of future cash flow tends to be equal to current price of bond.

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