Which of the Following Equations Is INCORRECT

question 96

Multiple Choice

Which of the following equations is INCORRECT?

• A) Expected future spot interest rate = forward interest rate + risk premium
• B) (1 + f₁) × (1 + f₂) × (1 + f₃) × ... × (1 + f_n) = (1 + YTM_n)ⁿ
• C) f_n = - 1
• D) (1 + YTM_n)ⁿ = (1 + YTM_{n - 1})^{n - 1}(1 + f_n)

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Definitions:

Foreign Currency

The currency used in a country other than the one where a company or individual is located, impacting financial transactions and reports when exchanged.

Canadian Dollars

The official currency of Canada, often represented by the symbol CAD.

Purchasing Power

The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.

Initial Sale

The first sale of a product or offering of shares to the public or an investor by a company.