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.

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Definitions:

C-D Bond

A chemical bond between a carbon atom and a deuterium atom, an isotope of hydrogen.

Infrared Wavelength

Portions of the electromagnetic spectrum that are longer than visible light but shorter than microwaves, commonly used in spectroscopy to identify molecular vibrations.

Wavenumber

Wavenumber is a measure of the number of wavelengths per unit distance, often used in spectroscopy to describe the energy level of electromagnetic radiation.

IR Spectroscopy

An analytical technique that uses infrared light to study the vibrational and rotational movements of molecules, revealing structural and functional group information.