Which of the following statements is CORRECT?
A) The yield to maturity for a coupon bond that sells at a premium consists entirely of a positive capital gains yield;it has a zero current interest yield.
B) The market value of a bond will always approach its par value as its maturity date approaches.This holds true even if the firm has filed for bankruptcy.
C) Rising inflation makes the actual yield to maturity on a bond greater than a quoted yield to maturity that is based on market prices.
D) The yield to maturity on a coupon bond that sells at its par value consists entirely of a current interest yield;it has a zero expected capital gains yield.
E) The expected capital gains yield on a bond will always be zero or positive because no investor would purchase a bond with an expected capital loss.

Question

Quizplus · Accepted Answer

When a bond is sold at its par value, the yield to maturity will consist entirely of the current interest yield because there are no capital gains involved. Bondholders will only receive the fixed coupon payments until maturity, and they will receive the par value of the bond at maturity.

Which of the Following Statements Is CORRECT