The ________ should reflect the coupon interest that will be earned plus either (1) any capital gain that will be realized from holding the bond to maturity, or (2) any capital loss that will be realized from holding the bond to maturity.

Question

Quizplus · Accepted Answer

The yield on a bond investment takes into account both the coupon payments and any capital gain or loss that will be realized from holding the bond to maturity. The dividend yield on a bond investment is not a relevant concept, and the bid-ask spread is a measure of the transaction cost of buying or selling a bond, rather than a measure of its expected return. The yield on a stock investment is also different from the yield on a bond investment, as it reflects the combination of dividend income and any capital gains or losses from holding the stock, which may result from changes in the stock price or in the company's earnings and prospects.

The ________ Should Reflect the Coupon Interest That Will Be