How can a bond have a negative rate of return?
A) if the current yield is greater than the coupon rate
B) if the current yield is less than the coupon rate
C) if the rate of capital loss exceeds the current yield
D) if the rate of capital gains is less than the current yield

Question

Quizplus · Accepted Answer

A bond can have a negative rate of return if the rate of capital loss exceeds the current yield. This means that the investor is losing money due to a decline in the bond's market value, even though they may be receiving interest payments. In this scenario, the capital loss outweighs the income generated by the bond, resulting in a negative overall return.

How Can a Bond Have a Negative Rate of Return