The reason why the expected return of a corporate bond is not equivalent to its yield to maturity. Introduction: A yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended till its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond; it likens the current estimation of a bond’s future cash flow to its present market cost. A coupon payment is the yearly interest payment that is remunerated to a bondholder by the issuer of the bond until the point that the debt obligation matures. The coupon payments are cyclic payments of interest to the bondholders.

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Chapter 6, Problem 26P

Summary Introduction

To determine: The reason why the expected return of a corporate bond is not equivalent to its yield to maturity.

Introduction:

A yield to maturity (YTM) is the rate of return projected for a security or a bond, which is apprehended till its maturity period. It is also considered as the internal rate of return (IRR) for a security or bond; it likens the current estimation of a bond’s future cash flow to its present market cost.

A coupon payment is the yearly interest payment that is remunerated to a bondholder by the issuer of the bond until the point that the debt obligation matures. The coupon payments are cyclic payments of interest to the bondholders.

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