4. Which of the following is not true about bonds? In all of the statements, assume other things

are held constant.

a. Price sensitivity, that is, the change in price due to a change in the required rate of

return, increases as a bond's maturity increases.

b. For a given bond of any maturity, a one percentage point increase in the interest rate (rd)

causes a larger dollar capital loss than the capital gain created by an identical decrease in the

interest rate.

c. For any given maturity, a one percentage point increase in the interest rate causes a smaller

dollar capital loss than the capital gain created by an identical decrease in the interest rate.

d. From a borrower's point of view, interest paid on bonds is tax-deductible.

e. A 20-year zero coupon bond has less reinvestment rate risk than a 20-year coupon bond.