Final answer:
The false statement is A, which incorrectly describes the term structure of interest rates as the relationship between yield to maturity and marketability, rather than different maturities.
Step-by-step explanation:
The correct answer to the student's question is option A: "The relationship between yield to maturity and marketability is known as the term structure of interest rates." This statement is NOT true because the term structure of interest rates actually describes the relationship between bond yields and different maturities, not marketability. The term structure is visually represented through a yield curve. Options B, C, and D all correctly describe aspects of the yield curve and its behavior over time.
To elaborate, the yield curve graphically shows how the yield to maturity varies with the term to maturity for bonds of similar credit quality. It reflects investors' expectations about future interest rates and their quantitative assessments of interest rate risk and can take different shapes such as normal, inverted, or flat depending on market conditions.
The statement in A incorrectly conflates marketability with the term structure of interest rates. Marketability refers to how easily a security can be bought or sold in the market, while the term structure focuses on how bond yields differ for bonds of the same credit quality but with different maturities.