Which of the Following Statements Is FALSE

question 31

Multiple Choice

Which of the following statements is FALSE?

• A)In general,the expected future spot interest rate will reflect investor's preferences toward the risk of future interest rate fluctuations.
• B)If investors did not care about risk,then they would be indifferent between investing in a two-year bond and investing in a one-year bond and rolling over the money in one-year.
• C)When we refer to the one-year forward rate for year 5,we mean the rate available today on a one-year investment that begins four years from today and is repaid five years from today.
• D)In general,we can compute the forward rate for year n by comparing an investment in an n-year,zero-coupon bond to an investment in an (n + 1)year,zero-coupon bond,with the interest rate earned in the nth year being guaranteed through an interest rate forward contract.

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