Which of the following statements about a bond that sells for its par value is correct?
A)The yield to maturity is comprised of a capital gains yield equal to the face value of the bond.
B)As long as market rates remain constant, the bond's capital gains yield will equal to zero.
C)The yield to maturity is comprised of an interest yield equal to the capital yield on the bond.
D)The yield to maturity is equal to the present value of interest payments received from the bond.
E)The yield to maturity is equal to the future value of interest payments received from the bond.

Question

Quizplus · Accepted Answer

A bond that sells for its par value has a coupon rate equal to the prevailing market rate, so its yield to maturity will also be equal to the coupon rate. As long as market rates remain constant, the bond's price will not change, so there will be no capital gains yield. Therefore, choice B is correct. Choice A, C, D, and E are all incorrect.

Which of the Following Statements About a Bond That Sells