Which of the Following Statements Is FALSE

question 8

Multiple Choice

Which of the following statements is FALSE?

• A)The swap contract-like forward and futures contracts-is typically structured as a "zero-cost" security.
• B)An interest rate swap is a contract entered into with a bank,much like a forward contract,in which the firm and the bank agree to exchange the coupons from two different types of loans.
• C)In a standard interest rate swap,one party agrees to pay coupons based on a fixed interest rate in exchange for receiving coupons based on the prevailing market interest rate during each coupon period.
• D)If short-term interest rates were to fall while long-term rates remained stable,then short-term securities would fall in value relative to long-term securities,despite their shorter duration.

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Definitions:

Industry Characteristics

These are the unique traits and trends that define the operations, competitive environment, and market behavior of a specific industry.

WACC

Calculating the Weighted Average Cost of Capital involves evaluating a company's cost of different types of capital and weighting each category based on its contribution to the total capital.

Debt Ratio

The proportion of a company's total debt to its total assets, indicating how much of the company's operations are financed by debt.

Equity Financing

A method of raising capital through the sale of shares in a company, providing investors ownership interests.