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Assuming Other Things Are Held Constant, Which of the Following

Question 133

Multiple Choice

Assuming other things are held constant, which of the following is true of bonds?


A) A bond's sensitivity to the change in price from a change in the interest rate increases as its maturity increases.
B) For a given bond of any maturity, a given percentage point increase in the interest rate causes a larger dollar capital loss than the capital gain stemming from an identical decrease in the interest rate.
C) For any given maturity, a given percentage point decrease in the interest rate causes a smaller dollar capital loss than the capital gain stemming from an identical decrease in the interest rate.
D) In the year of purchase of bonds, an investor gets a deduction for the difference in the market value of bonds purchased at a premium and the face value of the bonds.
E) A 20-year bond has more interest rate reinvestment risk than a 2-year bond.

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