Which of the Following Statements Is False

question 14

Multiple Choice

Which of the following statements is false?

• A) Forward rates tend not to be good predictors of future spot rates.
• B) Given the risk associated with interest rate changes, corporate managers require tools to help manage this risk.
• C) One of the most important tools to manage the risk of interest rate changes are interest rate forward contracts.
• D) A spot rate is an interest rate that we can guarantee today for a loan or investment that will occur in the future.

---

Definitions:

January Effect

A seasonal increase in stock market prices that typically occurs during the month of January, often attributed to the buying of stocks that were sold at the end of the previous year for tax purposes.

P/E Effect

The P/E effect is a market anomaly observed where stocks with lower Price-to-Earnings (P/E) ratios tend to outperform those with higher P/E ratios over time.

Strong-form Efficiency

A market hypothesis suggesting that prices fully reflect all available information, both public and private, making it impossible for investors to consistently achieve higher returns.

Semistrong-form Efficiency

A hypothesis that asserts the market price of securities already reflects all publicly available information, making it hard to achieve higher returns.