The ________ is the discount rate that equates a bond's price with the present value of its cash flows. Such a rate shows the promised return on a bond.

Question

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Yield to maturity (YTM) is the discount rate that makes the present value of a bond's cash flows equal to its price. YTM represents the total return that an investor can expect to earn if the bond is held until maturity and all interest and principal payments are received as scheduled. It takes into account the bond's price, par value, coupon rate, and time to maturity. Therefore, YTM is also called the promised yield or the internal rate of return.

The ________ Is the Discount Rate That Equates a Bond's