Chartered Financial Analyst Level 1

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Answer: more negative.

Compounding more frequently within the year results in a lower (more negative) yield-to-maturity. This is because the effect of compounding at a negative rate exacerbates the decline in the bond's yield. Options B and C are incorrect as they do not account for the impact of compounding frequency on a negative yield.

Author: LeetQuiz Editorial Team

Quick Answer

Answer-first summary for fast verification

Answer: more negative.

Author: LeetQuiz Editorial Team

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For a coupon bond with a negative yield, increasing the frequency of compounding within the year will cause the yield-to-maturity to be:

Exam-Like

more negative.

33.3%

unchanged.

33.3%

less negative.

33.3%