Question

The required rate of return on a bond is:

Group of answer choices:
O the interest rate that equates the current market price of the bond with the present value of all future cash flows received.
O equivalent to the current yield for nonpar bonds.
O less than the E(r) for discount bonds and greater than the E(r) for premium bonds.
O inversely related to a bond's risk and coupon.
O None of these choices are correct.

Answer 1

None of these choices are correct.

Step-by-step explanation:

The required rate of return is the minimum return an investor expects to achieve by investing in a project, or in other words,

The required rate of return on a bond is the return that a bond issuer must offer in order to entice investors to purchase the asset.

They are predominantly set by market forces and determined by the price at which issuers and investors agree.