What does yield to maturity (YTM) represent?

Yield to maturity (YTM) represents the total return on a bond held until maturity, which encompasses all future cash flows associated with the bond, including both coupon payments and the repayment of the principal amount at maturity. It reflects the bond's total expected earnings expressed as an annual rate, assuming that the bond is held until it matures and that all interest payments are reinvested at the same rate.

YTM provides investors a way to compare the profitability of different bonds, as it accounts for the current market price of the bond, the time remaining until maturity, and the total interest payments they will receive. This measure is crucial for bond investors as it helps to assess whether a bond is a suitable investment compared to other securities available in the market.

The other choices do not accurately describe YTM. The total expected profit on a stock pertains to equity investments rather than fixed-income securities, the annual interest rate of a bank account relates to savings products, and the market value of a company's assets focuses on the overall valuation of a company's resources rather than a specific measure related to bond investment. Thus, the correct understanding of YTM is essential for evaluating bond investments effectively.