The discount rate that sets the present value of the promised bond payments equal to the current market price of the bond is called:
A)the current yield.
B)the yield to maturity.
C)the zero-coupon yield.
D)the discount yield.

Question

Quizplus · Accepted Answer

The yield to maturity is the discount rate that equates the present value of a bond's cash flows to its current market price. It is the most comprehensive measure of a bond's return and takes into account all future interest payments and the principal repayment at maturity. The current yield only considers the annual interest payment as a percentage of the bond's current market price, while the zero-coupon yield and discount yield are specific measures for specific types of bonds.

The Discount Rate That Sets the Present Value of the Promised