How Does Arbitrage Help the Law of One Price

question 111

Essay

How does arbitrage help the Law of One Price?

Evaluate investment decisions based on required rates of return.

Develop skills in financial calculation and analysis.

Understand the tools and components of fiscal policy.

Comprehend the difference and relationship between fiscal policy, government spending, and taxation.

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Definitions:

Unilateral Contract

A type of contract where one party makes a promise in exchange for an act by the other party, becoming binding once the act is completed.

Bilateral Contract

A contractual agreement involving two parties where each promises to perform an act in exchange for the other's act.

Past Consideration

Refers to an act or benefit given in the past that cannot be legally considered as an inducement for a contract.

Illusory Promise

A statement that appears to be a promise but is too vague or lacks the requisite commitment to be legally enforceable as a contract.