Keynes assumed that the expected return on bonds is determined by

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According to Keynes, the expected return on bonds is determined by the interest rate on the bond adjusted for expectations of capital gains or losses on the bond. This is because the value of a bond is not just its annual interest payments, but also the potential for the bond to increase or decrease in value (capital gains or losses) based on market conditions and expected future interest rates. Therefore, the expected return on a bond is not simply the stated interest rate, but rather a combination of the interest rate and expected changes in the bond's value.

Keynes Assumed That the Expected Return on Bonds Is Determined