Which of the Following Statements Is False

question 334

Multiple Choice

Which of the following statements is false?

• A) If the rate of inflation is expected to decline by a small amount, there could still be an upward-sloping term structure.
• B) A bond's yield is typically calculated assuming that all of the promised coupon and principal payments will be made.
• C) Investors demand extra yield for non-taxable bonds as compensation for the unfavourable tax treatment.
• D) The compensation investors demand for bearing interest rate risk adds an upward slope to the term structure of interest rates.
• E) The compensation investors demand for buying bonds that don't trade very often is called a liquidity premium.

---

Definitions:

Fewer Resources

A situation or condition where there is a reduced availability of inputs or factors of production such as land, labor, and capital.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than competitors.

Opportunity Cost

The expense incurred by not choosing the second-best option when making a decision or selection.

Comparative Advantage

The capacity of an entity to generate a product or service with a smaller opportunity cost than others.