Which of the following statements are correct concerning yield-to-maturity (YTM)?
I. YTM considers both interest income and price appreciation.
II. YTM assumes the bond is called at the earliest possible date.
III. YTM is a compounded rate of return.
IV. YTM assumes all interest payments are reinvested at the YTM rate.

Question

Quizplus · Accepted Answer

YTM considers both interest income and price appreciation (I), it is a compounded rate of return (III), and it assumes all interest payments are reinvested at the YTM rate (IV). It does not assume the bond is called at the earliest possible date, which is a feature of yield-to-call, not YTM.

Which of the Following Statements Are Correct Concerning Yield-To-Maturity (YTM)