Use the Table for the Question(s) Below

question 48

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 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.

---

Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a marketplace.

Competitive

A state of being in which entities vie against each other to achieve a goal, such as market dominance or winning a contest.

Profit-Maximizing

The process or strategy of adjusting operations and resources to achieve the highest possible profit.

Market Wage

The prevailing wage rate in a labor market for a given skill set, determined by supply and demand forces.