Assuming other things are held constant, which of the following is correct?
A. The change in the price of a bond due to a change in the interest rate is more significant in bonds with longer maturity periods.
B. For a bond of any maturity, a given percentage point increase in the interest rate causes a larger dollar capital gain than the capital loss stemming from an identical decrease in the interest rate.
C. For any given maturity, a percentage point decrease in the interest rate causes a smaller dollar capital loss than the capital gain stemming from an identical increase 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 two-year bond.
Answer: A
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