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.
Correct Answer:
Verified
Correct Answer:
Verified
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