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:

Salaries and Wages Expense

The total cost incurred by an employer for employee compensation, including both salaries and hourly wages.

Temporary Account

An account that is closed at the end of each accounting period and its balances transferred to permanent accounts; examples include revenues, expenses, and dividends accounts.

Correct Entry

An accurate recording of a transaction in the books of accounts, adhering to accounting principles and conventions.

Correcting Entry

A journal entry made in accounting records to amend a previously made error.