If the Implied Forward Rates Are Realized, an Investor That

question 2

True/False

If the implied forward rates are realized, an investor that buys a six-month Treasury bill (and reinvests the proceeds every six months for five years) will produce the same number of dollars as an investment in a zero-coupon Treasury security at the five-year spot rate.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, not necessarily its market value.

Clientele Effect

A theory suggesting that changes in dividend policy may attract different groups of investors based on their preferences for dividend payouts versus capital gains.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price, typically expressed as a percentage.