The annual interest paid on a bond relative to its prevailing market price is called its
A) Promised yield.
B) Yield to maturity.
C) Coupon rate.
D) Effective yield.
E) Current yield.

Question

Quizplus · Accepted Answer

The annual interest paid on a bond relative to its prevailing market price is called the current yield. Choice A, promised yield, is not a common financial term. Choice B, yield to maturity, takes into account the current market price, coupon rate, and time to maturity to calculate the rate of return an investor would receive if they held the bond until maturity. Choice C, coupon rate, is the fixed rate of interest the bond pays annually, based on its face value. Choice D, effective yield, measures the actual yield an investor receives, taking into account any fees or expenses associated with holding the bond.

The Annual Interest Paid on a Bond Relative to Its