A significant portion of a coupon bond's total return is derived from the reinvestment of the interest payments.

Question

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When a bondholder receives interest payments from a coupon bond, those payments can be reinvested to earn additional interest. This is known as compounding, and it can significantly increase the bondholder's total return over time. Therefore, a significant portion of a coupon bond's total return is indeed derived from the reinvestment of the interest payments.

A Significant Portion of a Coupon Bond's Total Return Is