The yield to maturity __________ capital gains; the current yield __________ capital gains.
A) reflects; reflects
B) reflects; does not reflect
C) does not reflect; reflects
D) does not reflect; does not reflect

Question

Quizplus · Accepted Answer

Yield to maturity takes into account both the interest payments and any capital gains or losses that may occur if the bond is held until maturity. Therefore, it reflects capital gains. On the other hand, current yield only considers the annual interest payments divided by the current market price of the bond. It does not take into account any capital gains or losses that may occur. Therefore, it does not reflect capital gains.

The Yield to Maturity __________ Capital Gains; the Current Yield