The expected return of a bond is the anticipated average rate of return an investor can expect from holding the bond over its lifespan. It is influenced by the bond’s coupon payments, which are fixed interest payments made by the issuer to the bondholder, and any potential capital gains or losses upon maturity. The expected return takes into account both the periodic coupon income and the return of the bond’s face value at maturity, providing investors with a measure of the profitability of the investment.
