Which of the following is an example of a bond's yield?

Prepare for the Canon Financial Institute CFIRS Exam with flashcards and multiple choice questions. Each question comes with hints and explanations for better understanding. Get ready to excel in your exam!

A bond's yield represents the return an investor can expect to earn from the bond. Each of the choices provided contributes to understanding different aspects of a bond's yield.

The coupon rate is the fixed interest payment the bond issuer promises to pay to bondholders, typically expressed as a percentage of the bond's face value. This rate is crucial because it helps determine the bond's yield, especially when considering the bond's market price.

The market price of a bond is the price at which the bond trades in the market and can fluctuate due to changes in interest rates and the issuer's creditworthiness. This price affects the yield; when a bond is purchased at a price different from its face value, the yield can differ from the coupon rate.

The interest rate often refers to prevailing rates in the broader market, which influences the yield of new and existing bonds. Changes in interest rates can lead to variations in a bond's yield, highlighting the relationship between market conditions and investment returns.

Thus, since each of these components—coupon rate, market price, and interest rate—plays a role in determining the yield of a bond, it is accurate to say that they collectively represent an example of a bond's yield.

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