Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

The market-required rate of return on a bond that is held for its entire life is called the:

Coupon rate

Current yield

Yield to maturity (YTM)

Discount rate

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Verified step by step guidance

Understand the concept of Yield to Maturity (YTM): Yield to Maturity is the total return anticipated on a bond if it is held until it matures. It considers all coupon payments and the difference between the bond's current price and its face value.

Differentiate between the terms provided: The coupon rate is the annual interest rate paid by the bond issuer, expressed as a percentage of the bond's face value. Current yield is the annual coupon payment divided by the bond's current price. The discount rate is used in present value calculations but is not specific to bonds held to maturity.

Recognize why YTM is the correct answer: YTM accounts for the bond's entire life, including all cash flows (coupon payments and principal repayment) and the time value of money, making it the most comprehensive measure of return for a bond held to maturity.

Relate YTM to market-required rate of return: The market-required rate of return is the rate investors demand based on the bond's risk and market conditions. YTM reflects this rate as it incorporates the bond's price, coupon payments, and maturity value.

Conclude the explanation: Yield to Maturity is the correct term because it represents the market-required rate of return for a bond held until maturity, encompassing all relevant financial factors.