Which of the Following Statements Is Implied by the Existence

question 12

Multiple Choice

Which of the following statements is implied by the existence of no-arbitrage in a risk-neutral pricing framework?

• A) All bonds will have the same expected return irrespective of maturity.
• B) Expected long-term bond rates of return will be higher than expected short-term bond rates of return.
• C) Each period, bonds of all maturities will have the same expected rate of return.
• D) The probability of rates moving up versus moving down is fifty-fifty.

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Definitions:

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus the cost of goods sold.

FIFO

"First In, First Out," an inventory valuation method where goods first added to inventory are the first ones sold.

Ending Inventory

The final value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

FIFO

First-In, First-Out, an inventory valuation method where goods first bought are the first to be sold, assuming that the oldest inventory items are sold before newer ones.