The approximate yield to maturity of a bond is greater than the stated rate of interest when

Question

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When a bond is purchased at a discount, the yield to maturity (which represents the total return an investor can expect from the bond) will be greater than the stated rate of interest. This is because the investor is paying less than the face value of the bond, but will still receive the full face value at maturity. As a result, the investor will earn additional interest on their initial investment, increasing the effective yield.

The Approximate Yield to Maturity of a Bond Is Greater