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Answer: higher than the yield to maturity at the time of purchase.
**Explanation:** For a buy-and-hold investor, the total return is influenced by coupon reinvestment risk. If interest rates rise, the investor benefits from higher reinvestment returns on the coupons, leading to a total return that exceeds the original yield to maturity. Conversely, if interest rates fall, the reinvestment returns diminish, but the investor still receives the bond's face value at maturity. This scenario assumes the issuer meets all payment obligations as scheduled. Thus, the correct answer is **C**, as the total return is likely to be higher than the yield to maturity at purchase when interest rates rise.
Author: LeetQuiz Editorial Team
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If interest rates increase during the holding period, the total return of a coupon bond held until maturity is most likely to be:
A
lower than the yield to maturity at the time of purchase.
B
equal to the yield to maturity at the time of purchase.
C
higher than the yield to maturity at the time of purchase.
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