Question

Which one of the following statements is NOT true of realized yield?

A) The realized yield is the return earned on a bond given the cash flows actually received by the investor.
B) The realized yield is equal to the yield to maturity even if the bond is sold prior to maturity.
C) It is the interest rate at which the present value of the actual cash flows generated by the investment equals the bond's price at the time of sale of the bond.
D) All of the above are true.

Answer 1

The realized yield is NOT equal to the yield to maturity if the bond is sold prior to maturity.

Step-by-step explanation:

The statement that is NOT true of realized yield is option B) The realized yield is equal to the yield to maturity even if the bond is sold prior to maturity.

Realized yield refers to the actual return earned on a bond, given the cash flows received by the investor. It is different from the yield to maturity, which is the expected return if the bond is held until maturity.

For example, if an investor sells a bond prior to its maturity date, the realized yield may be different from the yield to maturity due to changes in interest rates or market conditions.