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Basic Question 7 of 9
The yield to maturity is the rate that equates ______.
B. the present value of the expected cash flows with the purchase price
C. the present value of the reinvested income with the principal repayment
A. the present value of the expected cash flows with the principal repayment
B. the present value of the expected cash flows with the purchase price
C. the present value of the reinvested income with the principal repayment
User Contributed Comments 4
| User | Comment |
|---|---|
| danlan | YTM considers coupon, reinvestment income, ... or in another word, the whole discounted cash flow. |
| EminYus | it considers the capital gain/loss too |
| gill15 | Confused with this. Isn't the Purchase price exactly the same as the principal? Or is principal value the maturity value? It must be otherwise it wouldnt make sense. I think I remember reading that before. |
| johntan1979 | gill15, the principal is the par value, which is repaid in full at maturity. |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
calculate annual yield on a bond for varying compounding periods in a year
CFA® 2025 Level I Curriculum, Volume 4, Module 7.