The discount rate that makes the present value of a bond's payments equal to its price is termed the:
A) rate of return.
B) yield to maturity.
C) current yield.
D) coupon rate.

Question

Quizplus · Accepted Answer

The yield to maturity is the discount rate that equates the present value of all cash flows to the current market price of the bond. It is the most comprehensive measure of a bond's expected return and takes into account both the periodic coupon payments and the principal repayment at maturity. Therefore, option B is the correct answer. Options A, C, and D are not correct because they refer to other measures of bond return that do not capture the full spectrum of cash flows associated with the bond.

The Discount Rate That Makes the Present Value of a Bond's