What is the primary characteristic of Yield to Maturity (YTM)?

Yield to Maturity (YTM) is defined as the total return anticipated on a bond if it is held until it matures. It represents the internal rate of return (IRR) for the bond, taking into account all future coupon payments and the difference between the bond's current market price and its face value, assuming no default occurs.

YTM provides investors with a comprehensive measure of the potential profitability of a bond investment, providing a single interest rate that encapsulates all future cash flows from the bond. This makes it a critical metric in assessing the value of fixed-income securities, comparing different bonds, and making investment decisions.

In contrast, the other options do not accurately capture the essence of YTM. The maturity date pertains to when the bond will expire and the principal will be repaid, while the nominal return simply refers to the stated interest without adjustment for market factors. The yield on a stock at maturity is not applicable since stocks do not have a maturity date in the same sense that bonds do. Therefore, the primary characteristic of Yield to Maturity is appropriately recognized as the interest rate on a bond if it is held to maturity.