Yield on a bond is best described as?

Yield on a bond is best described as?

• A. Total return including coupon payments and any price appreciation.
• B. Only the annual coupon payments.
• C. The current market price of the bond.
• D. The face value of the bond at maturity.

Answer: (A)

Yield on a bond is the total return you earn from holding it, combining the income from coupon payments with any change in the bond’s price over the holding period. This means you’re earning not just the cash coupons, but also the gain (or loss) from buying at one price and receiving a different amount at sale or at maturity. If you only consider the annual coupons, you miss the impact of price movements; if you focus on the current price or the face value at maturity, you’re looking at price or redemption value, not the overall return. Therefore, the best description is the total return from coupons plus price appreciation.

Yield on a bond is the total return you earn from holding it, combining the income from coupon payments with any change in the bond’s price over the holding period. This means you’re earning not just the cash coupons, but also the gain (or loss) from buying at one price and receiving a different amount at sale or at maturity. If you only consider the annual coupons, you miss the impact of price movements; if you focus on the current price or the face value at maturity, you’re looking at price or redemption value, not the overall return. Therefore, the best description is the total return from coupons plus price appreciation.