Final answer:
The yield-to-maturity approach overlooks reinvestment risk (I only), which pertains to the uncertainty of reinvesting coupon payments at the YTM rate. Price or market risk (II), however, is considered by YTM as it reflects bond price volatility due to market interest rate changes.
Step-by-step explanation:
The yield-to-maturity (YTM) approach to evaluating bonds does not consider all types of risks associated with bond investing. To answer the question, the yield-to-maturity approach fails to consider reinvestment risk (I only), meaning that the reinvestment of interest payments at the same rate as the YTM is not guaranteed. In contrast, price or market risk is actually factored into the YTM calculation, as it reflects the bond's price volatility due to changes in the market interest rates.
To further understand this, consider that the YTM calculation assumes that all coupon payments can be reinvested at the same rate as the initial YTM, which is rarely the case in practice. This omission of reinvestment risk from the YTM calculation could lead investors to misinterpret the potential returns on a bond. However, price or market risk is implied within the YTM because it reflects the current market conditions and the future value of money.