Assuming All Else Is Constant,which of the Following Statements Is

question 52

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 (r_d)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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