Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the exp

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Yield to maturity (YTM) is the rate of return expected from a bond held until its maturity date. However, the YTM equals the exp

ected rate of return under certain assumptions. Which of the following is one of those assumptions? The probability of default is zero. The bond is callable.

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1 answer:

Rashid [163] · Answer 1 · 2022-06-23T09:08:29+03:00

The probability of default is zero.

Answer: Option 1.

<u>Explanation:</u>

Yield to maturity (YTM) = [(Face value/Present value)1/Time period]-1. On the off chance that the YTM is not exactly the security's coupon rate, at that point the market estimation of the security is more prominent than standard worth ( premium security).

In the event that a bond's coupon rate is not as much as its YTM, at that point the bond is selling at a rebate or it is being sold at a discount rate.