Which of the following statements is CORRECT?

a) If a bond is selling at a discount, the yield to call is a better measure of return than is the yield to maturity.

b) On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.

c) On an expected yield basis, the expected current yield will always be positive because an investor would not purchase a bond that is not expected to pay any cash coupon interest.

d) If a coupon bond is selling at par, its current yield equals its yield to maturity, and its expected capital gains yield is zero.

e) The current yield on Bond A exceeds the current yield on Bond B; therefore, Bond A must have a higher yield to maturity than Bond B.

The yield of a bond is the same as its yield to maturity in that the yield to maturity of any bond is a function of the growth of the economy. The yield ot maturity of any bond is the bond's rate of return which is the return that investors will receive should all the promised payments be made.

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jepessoa jepessoa · Answer 2 · 2019-12-12T23:00:23+01:00

Answer:

D) If a coupon bond is selling at par, its current yield equals its yield to maturity, and its expected capital gains yield is zero.

Explanation:

A bond's yield to maturity is the total interest that the bond should yield if you held it until maturity date. The yield to maturity is expressed as an annual rate of return.

If the bond is selling at par, it means that it is selling at face value, so the bond's coupon is equal to the bond's yield to maturity.

If you buy a bond at discount, then you will have a capital gain (purchase price < par value) and that capital gain should yield an interest. But in this case, since you bought the bond at par, then you will not have any capital gains.