Which of the following statements is/are FALSE? I YTM is the discount rate that sets the...

Which of the following statements is/are FALSE? I YTM is the discount rate that sets the present value of the promised bond payments equal to the current market price of the bond. II To calculate the expected return, one should discount promised payments. III To calculate the YTM, one should discount expected payments. IV If there is a risk of default, then the bond’s expected return is greater than the YTM. V The realized return is always equal to the YTM. A. I, II B. II, IV C. II, III, IV, V D. II, III E. II, III, IV

Solutions

Expert Solution

Expected return is the profit or loss that an investor anticipates on a investment. There is a risk of default expected return will be less than the yield to maturity.

ANSWER = C (II, III, IV, V)

jeff jeffy answered 2 years ago

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