The ________ is the annual coupon payment divided by the current price of the bond,and is not always an accurate indicator.

Question

Quizplus · Accepted Answer

The given scenario is describing the current yield of a bond, which is calculated by dividing the annual coupon payment by the current market price of the bond. However, as stated in the question, this measure is not always accurate, as it does not take into account the time value of money or the full term structure of interest rates. The yield to maturity is a more comprehensive measure of a bond's expected return, taking into account the present value of all interest and principal payments over the lifetime of the bond. The bond discount rate is a similar concept to the yield to maturity, representing the required rate of return for investors to purchase the bond at its current price. The coupon rate is simply the fixed interest rate specified in the bond contract, and does not reflect current market conditions or the bond's expected return.

The ________ Is the Annual Coupon Payment Divided by the Current