If default probability is zero and bond is not called, then yield to maturity is_____________?
Correct answer: D. Equal to expected return rate
- A. Mature expected return rate
- B. Lower than expected return rate
- C. Higher than expected return rate
- D. Equal to expected return rate
Explanation
With zero default probability and no call, the bond's promised cash flows will be received as scheduled, so its yield to maturity equals the expected return rate. Default or call risk would make the comparison less direct.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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