An investor purchased a fixed-coupon bond at a time when the bond's yield to maturity was 6.9%.The investor sold the bond prior to maturity and realized a total return of 7.1%.Which of these most likely occurred while the investor owned the bond?

Question

Quizplus · Accepted Answer

The investor realized a total return higher than the initial yield to maturity, which suggests that market interest rates declined, increasing the bond's price and resulting in a capital gain.

An Investor Purchased a Fixed-Coupon Bond at a Time When