Even though coupon interest rates are fixed, bond values still fluctuate with the changes in market interest rates. Bonds exhibit interest rate risk, which is the risk that the return from the bond will change according to changes in the interest rates. An increase in interest rates reduces bond values. However, the decline in value of long-term bonds is more than the decline in value of short–term bonds because a change in interest rates has only a modest impact on the present value of near-term cash flows but a greater impact on the present value of distant cash flows. Bonds with longer maturity have a higher sensitivity to changes in market interest rates and have higher interest rate risk.

Bonds carry reinvestment rate risk, which is the risk that cash flows received may not be able to be reinvested at the expected rates if market rates have changed. It is important when there is a decrease in market interest rates. When a bond investor makes a short-term bond investment, if market interest rates decline when this investment matures, the proceeds from short-term investment will be reinvested at a lower interest rate. Long-term bond investors face higher interest rate risk and will have a disadvantage when market interest rates increase whereas short-term bond investor faces higher reinvestment rate risk and will have a disadvantage when market interest rates decline.

As also understood from the information given, all of the statements in the options about bond investors are correct, so the correct answer is E.