Use the Table for the Question(s) Below

question 53

Multiple Choice

Use the table for the question(s) below.

-Which of the following statements is false?

• A) No arbitrage opportunities will exist until the underlying prices diverge by more than the amount of the transaction costs.
• B) Because you will generally pay a slightly lower price when you buy a security (the ask price) than you receive when you sell (the bid price) you will pay the bid-ask spread.
• C) The price of a security should equal to the present value of its cash flows, up to the transaction costs of trading the security and the cash flows.
• D) In most markets, you must pay transactions costs to trade securities.

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Definitions:

Positive Externality

A beneficial effect experienced by a third party due to an economic transaction that they were not directly involved in.

Property Tax

A levy on property that the owner is required to pay, usually based on the value of the property.

Beekeepers

Individuals who maintain bee colonies, commonly in hives, primarily for collecting honey and other products produced by bees such as bee's wax, propolis, and royal jelly.

Private Solution

A resolution to an economic issue that relies on private transactions without government intervention.