Assuming All Else Is Constant, Which of the Following Statements

question 80

Multiple Choice

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

• A) Other things held constant, a 20-year zero coupon bond has more reinvestment risk than a 20-year coupon bond.
• B) Other things held constant, 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) Other things held constant, 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:

Psychology Textbook

An academic book specifically designed to provide comprehensive information on various topics within the field of psychology, including theories, research findings, and applications.

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A Russian physiologist known for his work in classical conditioning, particularly his experiments with dogs that led to the discovery of the conditioned reflex.

Jean Piaget

A Swiss psychologist best known for his pioneering work in child development and his theory of cognitive development.