The interest rate that equates the present value of the cash flow received from a debt instrument with its market price today is the
A) simple interest rate.
B) discount rate.
C) yield to maturity.
D) real interest rate.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is the interest rate that makes the present value of an investment's cash flows equal to its current market price. It considers the time value of money, the price paid for the bond, the bond's interest payments, and the face value of the bond when it matures. The YTM is also known as the "internal rate of return" on the investment. Therefore, C is the best choice.

The Interest Rate That Equates the Present Value of the Cash