Assuming All Else Is Constant, Which of the Following Statements

question 37

Multiple Choice

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

• A) 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.
• B) from a corporate borrower's point of view, interest paid on bonds is not tax-deductible.
• C) 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.
• D) 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.
• E) a 20-year zero coupon bond has more reinvestment rate risk than a 20-year coupon bond.

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Definitions:

Historical Cost

The original monetary value of an asset as it appears in the financial records, not adjusted for inflation or changes in value.

Subsequent Carrying

The process of recording or managing an asset on the balance sheet after its initial recognition, reflecting any changes in value.

Employees' Lounge

A designated area within a workplace set aside for employees to relax, take breaks, and socialize, often equipped with amenities for comfort or entertainment.

HVAC System

A technology of indoor and vehicular environmental comfort that stands for Heating, Ventilation, and Air Conditioning, used to provide thermal comfort and acceptable indoor air quality.