Assuming All Else Is Constant, Which of the Following Statements

question 11

Multiple Choice

Assuming all else is constant, which of the following statements is CORRECT?

• A)A 20-year zero coupon bond has more reinvestment rate risk than a 20-year coupon bond.
• B)For any given maturity, a 1.0 percentage point decrease in the market interest rate would cause a smaller dollar capital gain than the capital loss stemming from a 1.0 percentage point increase in the interest rate.
• C)From a corporate borrower's point of view, interest paid on bonds is not tax-deductible.
• D)Price sensitivity as measured by the percentage change in price due to a given change in the required rate of return decreases as a bond's maturity increases.
• E)For a bond of any maturity, a 1.0 percentage point increase in the market interest rate (rd) causes a larger dollar capital loss than the capital gain stemming from a 1.0 percentage point decrease in the interest rate.

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Definitions:

Inputs

The resources, materials, and labor that are used in the production process to create goods and services.

Technology

The application of scientific knowledge for practical purposes, especially in industry and commerce.

Production Function

An equation that describes the relationship between input factors (like labor and capital) and the output of goods or services.

Outboard Motor

A propulsion system for boats that includes an engine, gearbox, and propeller or jet drive, and is mounted externally at the stern (rear) of the vessel.