Which of the Following Statements Is FALSE

question 18

Multiple Choice

Which of the following statements is FALSE?

• A)The internal rate of return (IR
• R)of an investment in a zero-coupon bond is the rate of return that investors will earn on their money if they buy a default free bond at its current price and hold it to maturity.
• B)The yield to maturity of a bond is the discount rate that sets the future value (F
• V)of the promised bond payments equal to the current market price of the bond.
• C)Financial professionals also use the term spot interest rates to refer to the default-free zero-coupon yields.
• D)When we calculate a bond's yield to maturity by solving the formula, Price of an n-period bond = + + ...+ ,1 + YT
• M) The yield we compute will be a rate per coupon interval.

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Definitions:

Futures

Standardized contracts to buy or sell a specific asset at a predetermined price at a specified future date, used for hedging or speculation.

Forwards

A contract between two parties to buy or sell an asset at a specified price on a future date.

Swaps

Agreements to exchange two securities or currencies.

Profiling An Option

This term is not widely recognized in standard financial terminology. NO.