Which statement about total return on a bond is accurate?

Which statement about total return on a bond is accurate?

• A. It only includes coupon payments.
• B. It excludes any price changes.
• C. It includes both coupon payments and any price appreciation.
• D. It is the amount paid to purchase the bond.

Answer: (C)

Total return on a bond measures everything you actually earn from holding it over a period. It includes the cash coupons you receive plus any change in the bond’s price during that period, so you capture both income and capital gains (or losses). That’s why the accurate statement is that total return includes both coupon payments and price appreciation. It isn’t just the coupons, and it doesn’t ignore price moves, and it isn’t simply the amount you paid to buy the bond—the purchase price is the starting point, while total return reflects the overall change including income.

Total return on a bond measures everything you actually earn from holding it over a period. It includes the cash coupons you receive plus any change in the bond’s price during that period, so you capture both income and capital gains (or losses). That’s why the accurate statement is that total return includes both coupon payments and price appreciation. It isn’t just the coupons, and it doesn’t ignore price moves, and it isn’t simply the amount you paid to buy the bond—the purchase price is the starting point, while total return reflects the overall change including income.