Which of the following statements is CORRECT? a) If a bond is selling at a disco

Question

Which of the following statements is CORRECT?

a) If a bond is selling at a discount, the yield to call is a better measure of return than is the yield to maturity.

b) On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss.

c) On an expected yield basis, the expected current yield will always be positive because an investor would not purchase a bond that is not expected to pay any cash coupon interest.

d) If a coupon bond is selling at par, its current yield equals its yield to maturity, and its expected capital gains yield is zero.

e) The current yield on Bond A exceeds the current yield on Bond B; therefore, Bond A must have a higher yield to maturity than Bond B.

Explanation / Answer

correct option is "B" -On an expected yield basis, the expected capital gains yield will always be positive because an investor would not purchase a bond with an expected capital loss

When an investor invest in bond ,they always expect some sort of positive return as bond is a risk free security which make a fixed interest payment at regular intervals and principal payment at maturity .

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