Which of the Following Statements Is FALSE

question 8

Multiple Choice

Which of the following statements is FALSE?

• A)The swap contract-like forward and futures contracts-is typically structured as a "zero-cost" security.
• B)An interest rate swap is a contract entered into with a bank,much like a forward contract,in which the firm and the bank agree to exchange the coupons from two different types of loans.
• C)In a standard interest rate swap,one party agrees to pay coupons based on a fixed interest rate in exchange for receiving coupons based on the prevailing market interest rate during each coupon period.
• D)If short-term interest rates were to fall while long-term rates remained stable,then short-term securities would fall in value relative to long-term securities,despite their shorter duration.

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Definitions:

Revenue Management

Is the practice of strategically controlling inventory and pricing to maximize revenue, commonly used in industries like hotels, airlines, and hospitality.

Available Supply

The quantity of goods or materials in stock that is ready to be sold or distributed.

Maximize Profits

Maximizing profits is the strategic goal of increasing a company's earnings to its highest possible level by optimizing revenue streams and reducing costs.

Differential Pricing

The strategy of selling the same product to different customers at different prices.