The interest rate used to discount bond cash flows to determine the bond price is known as the:
A)coupon rate.
B)yield to maturity.
C)compound rate.
D)coupon yield.

Question

Quizplus · Accepted Answer

The yield to maturity is the interest rate used to discount bond cash flows to determine the bond price. It takes into account the present value of all future cash flows and represents the average return an investor can expect to earn if they hold the bond until maturity. The coupon rate is the fixed rate of interest paid by the bond issuer on the face value of the bond, and it does not necessarily reflect the yield to maturity. The compound rate refers to the frequency at which the interest is compounded, and the coupon yield is simply the annual interest payment divided by the face value of the bond.

The Interest Rate Used to Discount Bond Cash Flows to Determine