Which of the Following Statements Is False

question 11

Multiple Choice

Which of the following statements is false?

• A) Often, the decision to abandon a project entails costs, which may be either positive or negative.
• B) Mortgage interest rates are higher than Treasury rates because mortgages have an abandonment option that Treasuries do not have; you can prepay your mortgage at any time, while the Canadian government can repay its debt only according to the schedule outlined in the bond contract.
• C) A popular option gives holders of the bond the option to convert the bond into equity. These kinds of bonds are termed callable bonds.
• D) More often than not, there is an opportunity cost of abandoning a project: if you shut down the project and later decide to start it up again, you have to pay the costs of restarting the project.