Which of the following statements is CORRECT?
A) If a bond is selling at a discount,the yield to call is a better measure of return than is the yield to maturity.
B) On an expected yield basis,the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.
C) On an expected yield basis,the expected current yield will always be positive because an investor would not purchase a bond that is not expected to pay any cash coupon interest.
D) If a coupon bond is selling at par,its current yield equals its yield to maturity,and its expected capital gains yield is zero.
E) The current yield on Bond A exceeds the current yield on Bond B;therefore,Bond A must have a higher yield to maturity than Bond B.

Question

Quizplus · Accepted Answer

If a bond is selling at par, its coupon rate equals its yield to maturity, so its current yield also equals its yield to maturity. Further, if a bond is selling at par, its expected capital gains yield is zero because the bond’s price will remain the same, so the total expected return equals the expected coupon payment, which is just the coupon rate times the par value.

Which of the Following Statements Is CORRECT