a Heights Inc.bonds have a coupon rate of 7%,a yield to maturity of 10%,a face value of $1,000,and mature in 10 years.Which of the following statements is MOST correct?

Question

Quizplus · Accepted Answer

The yield to maturity represents the total return an investor will earn if they hold the bond until maturity. In this case, the yield to maturity is 10%, which means an investor who purchases the bond today and holds it until maturity will earn a return of 10% per year. The coupon rate of 7% is only the annual interest payment the investor will receive. Therefore, choices A and B are incorrect. Choice C may be misleading, as it implies a return of 17% per year, which is not accurate. The return will be 10% per year if the investor holds the bond until maturity.

A Heights Inc