The appropriate rate to use to discount the cash flows of a bond in order to determine the current price is the ________.

Question

Quizplus · Accepted Answer

The appropriate rate to discount the cash flows of a bond is the yield to maturity. This is the rate of return an investor would earn if they held the bond until maturity and received all cash flows. The yield to maturity takes into account the current market price, the face value, the coupon rate, and the time to maturity. Using the yield to maturity allows for a more accurate determination of the current price of the bond.

The Appropriate Rate to Use to Discount the Cash Flows