YTM is the total return an investor can expect from a bond if held to maturity, considering annual coupon payments and any difference between the purchase price and the bond's face value.
Why the Answer is D
YTM incorporates all cash flows, providing a comprehensive measure of total return.
Why Other Options are Incorrect
A. Running Yield: Considers only current income relative to price, not total return.
B. Annual Coupon: Ignores price changes and reinvestment potential.
C. Price-to-Book Ratio: Unrelated to bonds, applies to equities.
ICWIM Study Guide, Chapter on Fixed Income: Details YTM and its role in total return calculations.
Bond Investment Literature: Highlights the comprehensive nature of YTM.
References
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