Which of the following statements is FALSE?
A)Forward rates tend not to be good predictors of future spot rates.
B)Given the risk associated with interest rate changes,corporate managers require tools to help manage this risk.
C)One of the most important tools to manage the risk of interest rate changes are interest rate forward contracts.
D)A spot rate is an interest rate that we can guarantee today for a loan or investment that will occur in the future.

Question

Quizplus · Accepted Answer

A spot rate is the interest rate at which we can borrow or invest money today. It is not a guarantee for future borrowing or investment, which can be subject to changes in market conditions. Forward rates, on the other hand, are estimates of expected future spot rates, and while they are not always perfectly accurate predictors, they can be useful in managing interest rate risk. Interest rate forward contracts are indeed an important tool for managing interest rate risk.

Which of the Following Statements Is FALSE