Gross redemption yield takes into account which of the following?

• A. Only coupon payments
• B. Only the redemption value
• C. Market price and capital gain/loss
• D. Only the yield to maturity at issue

Answer: (C)

Gross redemption yield measures the total annual return from buying a bond today at the current market price and holding it to maturity. It captures what you’ll actually earn, including the cash from coupons and the payoff at maturity, and crucially the gain or loss you incur if the redemption value differs from the price you paid. So the essence is the starting point (market price) and the final outcome relative to that price (capital gain or loss), which together determine the total return. The other options miss parts of this full picture: focusing only on coupon payments ignores how the price paid affects the overall return; focusing only on the redemption value ignores coupon income; and using the yield at issue ignores current price and the realisable gain or loss.