Which of the Following Statements Is False

question 50

Multiple Choice

Which of the following statements is false?

• A) In general, the expected future spot interest rate will reflect investor's preferences toward the risk of future interest rate fluctuations.
• B) If investors did not care about risk, then they would be indifferent between investing in a two-year bond and investing in a one-year bond and rolling over the money in one-year.
• C) When we refer to the one-year forward rate for year 5, we mean the rate available today on a one-year investment that begins four years from today and is repaid five years from today.
• D) In general, we can compute the forward rate for year n by comparing an investment in an n-year, zero-coupon bond to an investment in an (n + 1)-year, zero-coupon bond, with the interest rate earned in the nth year being guaranteed through an interest rate forward contract.