Which of the Following Statements Regarding the Law of One

question 11

Multiple Choice

Which of the following statements regarding the Law of One Price is INCORRECT?

• A)At any point in time,the price of two equivalent goods trading in different competitive markets will be the same.
• B)One useful consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value,we can use any competitive price to determine a cash value,without checking the price in all possible markets.
• C)If equivalent goods or securities trade simultaneously in different competitive markets,then they will trade for the same price in both markets.
• D)An important property of the Law of One Price is that it holds even in markets where arbitrage is not possible.

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Definitions:

Compound Annual Returns

Measures the geometric average amount of money earned over a specified time period per year, taking into account the effect of compounding.

Equity Mutual Fund

A type of mutual fund that primarily invests in stocks, seeking to offer returns based on the performance of these equities.

Diversified Equity

An investment strategy that involves spreading investments among various stocks to reduce risk.

Compounded Quarterly

The process of calculating and adding interest to the principal sum of an investment or loan every quarter of a year.