A change in market conditions causes the market price of a bond to change because of changes in the bond's:
A)coupon rate.
B)current (interest) yield.
C)yield to maturity.
D)principal value.
E)maturity value.

Question

Quizplus · Accepted Answer

The yield to maturity is the total return anticipated on a bond if the bond is held until it matures. A change in market conditions can affect the yield to maturity, causing the bond's price to change. When the yield to maturity increases, the bond's price decreases, and when the yield to maturity decreases, the bond's price increases. Therefore, changes in market conditions affect the yield to maturity, which in turn affects the bond's price.

A Change in Market Conditions Causes the Market Price of a Bond