Respuesta :
If the bondholder does not hold bond until it matures than the rate of return will be lower than the yield to maturity.
Bonds are fixed-income securities that reflect loans from shareholders to borrowers . A bond can be compared to a contract outlining the conditions of the loan and the associated payments between the lender and the borrower. Businesses, municipalities, regions, and national countries utilize bonds to fund operations and initiatives. Bondholders are the issuer's creditors or creditors.
The entire return expected on a bond when it is kept to expiration is known as yield to maturity (YTM). Despite being represented as an annual rate, yield to maturity is considered to be a long-term bond yield. It is, therefore, the internal rate of returns (IRR) of a bond investment assuming the investor holds the bond to maturity, with all planned payments made and invested at the exact pace.
The complete question is here:
What is the relationship between a bondholder's rate of return and the bond's yield to maturity if he does not hold the bond until it matures?
- The rate of return will be higher than the yield to maturity.
- There is no predetermined relationship between the rate of return and the yield to maturity.
- The rate of return will equal the yield to maturity.
- The rate of return will be lower than the yield to maturity.
Learn more about yield to maturity (YTM) here:
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