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.

Question

Quizplus · Accepted Answer

If short-term interest rates were to fall while long-term rates remained stable, then short-term securities would rise in value relative to long-term securities, despite their shorter duration. This is because the present value of the future cash flows from a short-term security would increase as interest rates fall.

Which of the Following Statements Is FALSE