Which of the Following Is False

question 8

Multiple Choice

Which of the following is false?

• A)Credit risk refers to the probability of a debtor not paying the principal or interest due on an outstanding debt.
• B)Since investors are risk averse, they must be offered the "bonus" of extra interest to accept more risk; the extra return or interest is called a liquidity premium, and its size increases with the riskiness of the borrower.
• C)Financial investors care about the after-tax return on their investments more than the pre-tax return.
• D)Since the interest earned on municipal securities is exempt from the federal income tax, the yields on municipal securities are typically well below the yields on other (taxable) securities with similar credit ratings and similar terms to maturity.

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Definitions:

Internal Validity

The extent to which the design and conduct of a study allow for accurate attribution of outcomes to the intervention or treatment, rather than to confounding variables.

Nonequivalent Control Group Design

A quasi-experimental research design where the experimental group and control group may not be strictly comparable at the outset of the experiment, lacking random assignment.

Selection Differences

Differences in the type of subjects who make up each group in an experimental design; this situation occurs whenparticipants elect which groupthey are to be assigned to.

Independent Variable

In experimental research, the factor that is altered by the scientist to observe how it affects a dependent variable.