Which of these statements are false? (One wrong answer cancels one correct answer.)

a. Different classes (tranches) in a senior-subordinate structure are exposed to different levels of credit risk.

b. According to the pure expectations theory, an inverted yield curve implies that investors think short-term interest rates will decrease.

c. According to the market segmentation theory, the actual expectations of the market about the future level of interest rates are irrelevant.

d. The price value of a basis point is the change in the price of a bond when the yield changes by 1%.

e. You are a speculator who thinks that the yields to maturity of bonds will increase over the next year. A good strategy for you would be to buy a bond with a low modified duration.

f. If you invest in a 20-year bond with the goal of selling it in 5 years, you are exposed to price risk.

g. Immediately after a coupon is paid, the clean price of a bond is equal to its dirty price.

h. If a recession happens, the overall risk of a pool of mortgages can be reduced by creating collateralized mortgage obligations (CMOs).

i. According to the liquidity theory, a flat yield curve implies that investors think short-term interest rates will stay the same.

j. If you own a principal-only tranche, you want borrowers to pay their mortgages as fast as possible.

k. In a strongly efficient market, it is possible to profit from insider information.