Question
Assuming all else is constant, which of the following statements is CORRECT? a. Price sensitivity as measured by the percentage change in price due to
Assuming all else is constant, which of the following statements is CORRECT? a. 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. b. From a corporate borrower's point of view, interest paid on bonds is not tax-deductible. c. 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. 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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