If the YTM equals the actual compound return an investor realizes on an investment in a coupon bond purchased @premium-to-par, it is least likely that:
A. cash flows will be paid as promised
B. the bond will not be sold at a capital loss
C. cash flows will be reinvested at the YTM rate
D. The bond will be held until maturity
A Bond Question
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“It is least likely that the bond will not be sold at a capital loss”….
I can’t even parse that sentence.
I’m Da Church of the faithful, I’m Liao Fengyi, clergywoman mother should have to introduce you to me, I have seen you twice, in which time you are more impressed with everyone I guess in the back of the church at noon to eat noodle face!
3 sources of bond return is 1) coupon interest 2) principal appreciation/depreciation 3) reinvested (coupon) income. YTM is based on the assumption that the bond is held to maturity, coupons are reinvested at the YTM, and all payments occur.
Well, in a sense, the bond *is* likely to be sold at a capital loss, since it
has been bought at a premium to par.
So that sentence should be parsable (and least likely).
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My Name's not Martin.