Which of the Below Statements Is FALSE

question 35

Multiple Choice

Which of the below statements is FALSE?

• A) One interpretation of the Pure Expectations Theory suggests that the return will vary dramatically over a short-term investment horizon starting today.
• B) According to the liquidity theory of the term structure, the implicit forward rates will not be an unbiased estimate of the market's expectations of future interest rates because they embody a liquidity premium.
• C) The preferred habitat theory adopts the view that the term structure reflects the expectation of the future path of interest rates as well as a risk premium and at the same time rejects the assertion that the risk premium must rise uniformly with maturity.
• D) The market segmentation theory differs from the preferred habitat theory in that it assumes that neither investors nor borrowers are willing to shift from one maturity sector to another to take advantage of opportunities arising from differences between expectations and forward rates.

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Definitions:

Misrepresentation

The act of providing false or misleading statements that induce someone to enter into a contract.

Legal Misrepresentation

An untrue assertion of reality presented by one individual to another, resulting in the latter being persuaded to enter into an agreement.

Concealing

The act of hiding, covering, or keeping something secret, often with the intent to deceive or defraud.

Termite Infestation

The presence and dwelling of termites in a structure, causing damage and potentially undermining the integrity of the property.