What characteristic does the yield to maturity represent on a long-term bond?

The yield to maturity (YTM) on a long-term bond represents the annual rate of return an investor can expect to earn if the bond is held until maturity, assuming that all coupon payments are made as scheduled. This metric accounts for the bond's current market price, total interest payments, and the time remaining until maturity.

What makes the annual rate characteristic so significant is that it consolidates various factors into one comprehensive figure, making it easier for investors to compare bonds with different prices, coupon rates, and maturities. The YTM is effectively the internal rate of return (IRR) for these payments, reflecting not just the current yield based on coupon payments but also any potential gains or losses incurred if the bond is sold prior to maturity or held until the maturity date.

In contrast, current yield only looks at the income provided by the bond relative to its current price without considering the total return over time. Annuity payment refers to the periodic coupon payments a bond issues, while short-term rate relates to the yield or return on investments with shorter maturities, which does not apply in this context of long-term bonds and their overall returns.