Consider Two Securities,A & B

question 86

Multiple Choice

Consider two securities,A & B.Suppose a third security,C,has the same cash flows as A and B combined.Given this information about securities A,B,& C,which of the following statements is INCORRECT?

• A)If the total price of A and B is cheaper than the price of C,then we could make a profit selling A and B and buying C.
• B)Price(C)= Price(A)+ Price(B).
• C)Because security C is equivalent to the portfolio of A and B,by the law of one price they must have the same price.
• D)The relationship known as value additivity says that the value of a portfolio is equal to the sum of the values of its parts.

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Definitions:

Macrosociological

Refers to the study of large-scale social structures and processes, focusing on how society shapes and is shaped by these structures.

W. I. Thomas

An American sociologist best known for his work in the development of social theory and for the Thomas Theorem, which states that situations defined as real are real in their consequences.

Social Disorganization

A condition where a society's structure is weakened, leading to the breakdown of social norms and values, and resulting in social instability.

Deviance

Actions or behaviors that violate societal norms and expectations, often eliciting negative response.