Assuming All Else Is Constant, Which of the Following Statements

question 66

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:

MP-3 Player

A portable digital device designed to play audio files in the MP3 format, allowing for the storage and playback of music and other audio.

Tax

A compulsory contribution to state revenue, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.

Deadweight Loss

An economic inefficiency arising when a good or service fails to meet its free market equilibrium point.

Taxes

Mandatory payments made to the government, taken from individuals' earnings and the profits of businesses, or incorporated into the price of certain products, services, and financial dealings.