The total rate of return is equal to
A)the coupon rate plus the rate of capital gains.
B)the coupon rate plus the current yield.
C)the current yield plus the rate of capital gains.
D)the coupon rate multiplied by the rate of capital gains.

Question

Quizplus · Accepted Answer

The current yield measures the return generated by the investment's annual income (coupon payments) relative to its current market price. The rate of capital gains, on the other hand, measures the increase in the investment's market price over time. Thus, the total rate of return would be the sum of both the current yield and the rate of capital gains.

The Total Rate of Return Is Equal to