Question

Q. The discount rate that equates the present value of a bond's future cash flows to its market price represents the bond's:

Answer 1

Answer:

Yield to maturity (YTM) is the internal rate of return (IRR) of the bond. The IRR of a project is the discount rate that equates the present value of future cash flows to the initial investment. In capital budgeting parlance, it is that discount rate that makes the net present value (NPV) equal to zero.