Why isn't the current yield a good indicator of holding a bond?
A) It doesn't account for the yield to maturity.
B) It doesn't account for capital gains or losses.
C) It doesn't account for the coupon.
D) It assumes that the current price equals its par value.

Question

Quizplus · Accepted Answer

The current yield only takes into account the annual interest payment (coupon) relative to the current market price of the bond. It does not account for any potential capital gains or losses if the bond is sold before maturity, nor does it consider the yield to maturity which factors in the total return of the bond if held to maturity.

Why Isn't the Current Yield a Good Indicator of Holding