The required return defines the yield at which a bond should be trading and serves as the discount rate in the bond valuation process.

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Quizplus · Accepted Answer

The required return on a bond is indeed the yield at which the bond should trade. It reflects the return investors demand for holding the bond, considering its credit risk, time to maturity, and interest rate environment. This required return is used as the discount rate when calculating the present value of the bond's future cash flows (coupons and principal) to determine its fair value or price.

The Required Return Defines the Yield at Which a Bond