18) Which of the following statements is false: A) The expectations hypothesis of the term structure of interest rates states that the long-term interest rate should be approximately equal to the sum of expected short-term interest rates over the contract horizon. B) The Gordon Growth Formula predicts that the price-dividend ratio fluctuates due to changes in interest rate and/or dividend growth rate. C) Fluctuations in the stock market depend only on investor expectations of future dividends. D) Bank runs can sometimes be prevented through deposit insurance. E) If the term structure of interest rates does not change, the price of zero-coupon bonds will increase over time.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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18) Which of the following statements is false:
A) The expectations hypothesis of the term structure of interest rates states that the long-term
interest rate should be approximately equal to the sum of expected short-term interest rates
over the contract horizon.
B) The Gordon Growth Formula predicts that the price-dividend ratio fluctuates due to changes
in interest rate and/or dividend growth rate.
C) Fluctuations in the stock market depend only on investor expectations of future dividends.
D) Bank runs can sometimes be prevented through deposit insurance.
E) If the term structure of interest rates does not change, the price of zero-coupon bonds will
increase over time.
Transcribed Image Text:18) Which of the following statements is false: A) The expectations hypothesis of the term structure of interest rates states that the long-term interest rate should be approximately equal to the sum of expected short-term interest rates over the contract horizon. B) The Gordon Growth Formula predicts that the price-dividend ratio fluctuates due to changes in interest rate and/or dividend growth rate. C) Fluctuations in the stock market depend only on investor expectations of future dividends. D) Bank runs can sometimes be prevented through deposit insurance. E) If the term structure of interest rates does not change, the price of zero-coupon bonds will increase over time.
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