Which of the following statements is FALSE?
A) When we calculate a bond's yield to maturity by solving the formula, Price of an n-period bond =
+
+ ... +
,
The yield we compute will be a rate per coupon interval.
B) Financial professionals also use the term 'spot interest rates' to refer to the default-free zero-coupon yields.
C) The internal rate of return (IRR) of an investment in a zero-coupon bond is the rate of return that investors will earn on their money if they buy a default free bond at its current price and hold it to maturity.
D) The yield to maturity of a bond is the discount rate that sets the future value (FV) of the promised bond payments equal to the current market price of the bond.
Correct Answer:
Verified
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