Which of the Following Is False

Multiple Choice

Which of the following is false?

A) Credit risk refers to the probability of a debtor not paying the principal or interest due on an outstanding debt.
B) Since investors are risk averse, they must be offered the "bonus" of extra interest to accept more risk; the extra return or interest is called a liquidity premium, and its size increases with the riskiness of the borrower.
C) Financial investors care about the after-tax return on their investments more than the pre-tax return.
D) Since the interest earned on municipal securities is exempt from the federal income tax, the yields on municipal securities are typically well below the yields on other (taxable) securities with similar credit ratings and similar terms to maturity.