The impact of capital gains and losses is reflected in the
A) current yield.
B) coupon rate.
C) yield to maturity.
D) face value.

Question

Quizplus · Accepted Answer

The impact of capital gains and losses is reflected in the yield to maturity. Yield to maturity represents the annual return on investment if held until maturity, taking into account any changes in the bond's price. An increase in the bond's price due to capital gains will result in a lower yield, while a decrease in the bond's price due to capital losses will result in a higher yield. Therefore, yield to maturity is the best choice to reflect the impact of capital gains and losses. Current yield, coupon rate, and face value do not directly account for changes in bond price due to capital gains and losses.

The Impact of Capital Gains and Losses Is Reflected in the