Which of the Following Statements Is False

question 28

Multiple Choice

Which of the following statements is false?

• A) U.S. Treasury securities are widely regarded to be risk-free because there is virtually no chance the government will default on these bonds.
• B) In general, if the interest rate is r and the tax rate is τ, then for each $1 invested you will earn interest equal to r and owe taxes of τ × r on the interest.
• C) Investors may receive less than the stated interest rate if the borrowing company has financial difficulties and is unable to fully repay the loan.
• D) Taxes reduce the amount of interest the investor can keep, and we refer to this reduced amount as the tax effective interest rate.

---

Definitions:

Price-searcher Firm

A company that determines the price of its products based on demand and supply conditions rather than prevailing market prices.

Competitive Price-searcher

A market scenario where sellers actively seek out buyers by setting prices independently to capture consumer demand.

Raise Price

The act of increasing the cost at which a good or service is sold, which can affect demand, revenue, and profit margins.

Lose Sales

The phenomenon of experiencing a reduction in the number of units sold or in total revenue.