Which of the Following Statements Is False

question 71

Multiple Choice

Which of the following statements is false?

• A) The forward rate for year 1 is the rate on an investment that starts today and is repaid in one year; it is equivalent to an investment in a one-year zero-coupon bond.
• B) The forward rate is only a good predictor of spot interest rates in the future when investors are risk adverse.
• C) We can use the law of one price to calculate the forward rate from the zero-coupon yield curve.
• D) An interest rate forward contract is a contract today that fixes the interest rate for a loan or investment in the future.

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