Which of the following statements is false?
A) When we refer to the "risk-free interest rate," we mean the rate on U.S. Treasuries.
B) Interest rates vary with the investment horizon.
C) All borrowers, besides the U.S. Treasury, have some risk of default.
D) When interest on a loan is tax deductible, the effective after-tax interest rate is τ × (1 - r).

Question

Quizplus · Accepted Answer

The formula for the effective after-tax interest rate when interest on a loan is tax deductible is actually τ × r, where τ is the marginal tax rate and r is the before-tax interest rate. Therefore, statement D is false.

Which of the Following Statements Is False