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.
Correct Answer:
Verified
Q94: Omega Inc. holds a 12-year bond that
Q97: If the yield to maturity (the market
Q101: The risk that income from a bond
Q108: If interest rates decline, bondholders will earn:
A)a
Q111: Stephanie purchased a corporate bond that matures
Q132: Omega Software Corporation's bond with a face
Q134: Which of the following statements is true
Q135: Which of the following mathematical expressions is
Q136: An increase in interest rates will increase
Q138: GP&L sold $1,000,000 of 12 percent, 30-year,
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents