When computing yield to maturity, the implicit reinvestment assumption is that the interest payments are reinvested at the
A) coupon rate.
B) current yield.
C) yield to maturity at the time of the investment.
D) prevailing yield to maturity at the time interest payments are received.
E) the average yield to maturity throughout the investment period.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) calculation assumes that all coupon payments are reinvested at the same rate as the YTM at the time of the investment. This means that the future cash flows (coupon payments) are compounded at the YTM rate until maturity.

When Computing Yield to Maturity, the Implicit Reinvestment Assumption Is