The Distinction Between Interest Rates and Returns
1) The ________ is defined as the payments to the owner plus the change in a security”s value expressed as a fraction of the security”s purchase price.
A) yield to maturity
B) current yield
C) rate of return
D) yield rate
2) Which of the following are true concerning the distinction between interest rates and returns?
A) The rate of return on a bond will not necessarily equal the interest rate on that bond.
B) The return can be expressed as the difference between the current yield and the rate of capital gains.
C) The rate of return will be greater than the interest rate when the price of the bond falls between time t and time t + 1.
D) The return can be expressed as the sum of the discount yield and the rate of capital gains.
3) The sum of the current yield and the rate of capital gain is called the
A) rate of return.
B) discount yield.
C) pertuity yield.
D) par value.