What is the formula for bond expected return?

The correct formula for a bond's expected return is indeed based on the sum of the coupon yield and the capital gains rate. The rationale behind this is rooted in the investment income that a bond provides.

The coupon yield represents the income generated from the bond's periodic interest payments, which is a key part of the total return to bondholders. The capital gains rate reflects any appreciation in the bond's price, which occurs when the bond is sold for more than its purchase price or matures above par value.

By combining these two components—coupon yield and capital gains—you arrive at the expected return of the bond. This holistic view captures both the income and potential price appreciation aspects of holding the bond, offering a clear picture of what an investor can expect to earn from their investment in the bond.

The other options do not correctly represent how returns on bonds are calculated, as they either incorrectly use subtraction, incorrect multiplicative relationships, or reference inappropriate rates.