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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Definitions:

Natural Selection

Differential success in the reproduction of different phenotypes resulting from the interaction of organisms with their environment.

Differential Success

The variation in reproductive success among organisms within a population due to differences in heritable traits.

Reproduction

Reproduction is the biological process by which new individual organisms are produced, either sexually with genetic material from two parents, or asexually from one organism.

Phenotype

The collection of traits visible in a person that emerge from how their genetic makeup interacts with their surroundings.