The ______ is a measure of the average rate of return an investor will earn if the investor buys the bond now and holds until maturity.

Question

Quizplus · Accepted Answer

The yield to maturity is the best choice because it takes into account the present value of all future cash flows from the bond, including interest payments and the principal repayment at maturity. This measure provides a more accurate estimate of the expected return on a bond investment than the current yield or dividend yield, which only consider the current income from the bond. The P/E ratio is not relevant for bonds as it is a metric used to analyze stocks.

The ______ Is a Measure of the Average Rate of Return