Assuming other things are held constant, which of the following is true of bonds? A....
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Finance
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. A 20-year bond has more interest rate reinvestment risk than a 2-year bond.
E. 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.
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