The rate which equates the purchase price of a security with the present value of all its expected annual net cash inflows is the:
A) Yield to maturity
B) Annual percentage rate (APR)
C) Add-on interest rate
D) Coupon rate
E) Simple interest rate
F) Current yield
G) Holding-period yield
H) Discount rate

Question

Quizplus · Accepted Answer

Yield to maturity (YTM) is the rate that equates the purchase price of a bond or other fixed-income security with the present value of all its expected future cash flows, including coupon payments and the repayment of the principal at maturity. It is a comprehensive measure of the return on a bond.

The Rate Which Equates the Purchase Price of a Security