Financial Planner

Answer: D - Yield to maturity is the concept that has the shortcoming of assuming all cash flows are discounted at the same rate and are reinvested at the yield to maturity rate. The yield to maturity is the internal rate of return of a bond if held to maturity. It considers the current interest return and all price appreciation or depreciation. It is also a measure of risk and is the discount rate that equals the present value of all cash flows. From a firm perspective, it is the cost of borrowing by issuing new bonds. From an investor perspective, it is the internal rate of return that is received if the bond is held to maturity.