The Law of One Price Asserts That We Will Obtain

question 19

True/False

The Law of One Price asserts that we will obtain the same valuation of a project whether
(a) we use the domestic cost of capital of the domestic currency equivalent cash flows at the forward exchange rates or
(b) we use the corresponding foreign cost of capital and then convert the present value (PV) of the foreign currency value of the cash flows at the spot rate.

---

Definitions:

Salvador Allende

The first Marxist to become president of a Latin American country through open elections, serving as President of Chile from 1970 until his death in 1973.

Nixon Administration

The executive leadership and period of U.S. government under President Richard Nixon, from 1969 to 1974, marked by significant events such as the Vietnam War and the Watergate scandal.

Chilean Military

The armed forces of Chile, consisting of the Army, Navy, and Air Force, responsible for the defense of the country.

Mark W. Felt

An Associate Director of the FBI who was later revealed to be the informant known as "Deep Throat," providing crucial information about the Watergate scandal to the press.