1. Which of the following is most correct? Please explain why. a. Arbitrage take
ID: 2796064 • Letter: 1
Question
1. Which of the following is most correct? Please explain why.
a. Arbitrage takes advantage of differing prices in competitive markets.
b. The Law of One Price states that if equivalent goods trade in different competitive markets, they will trade at different prices.
c. The NPV rule states that you should accept all projects whose internal rate of return (IRR) is greater than 0.
d. The time value of money principle states that a dollar tomorrow is worth more than a dollar today.
e. In a competitive market, goods are bought at one price and sold at a different price.
Explanation / Answer
a) Arbitrage takes advantage of differing prices in competitive markets. is most correct
b is wrong because Law of One Price states that if equivalent goods trade in different competitive markets, they will trade at same prices.
c is wrong because The NPV rule states that you should accept all projects whoseNPV is greater than 0.
d is wrong because The time value of money principle states that a dollar today is worth more than a dollar tomorrow
e is wrong because In a competitive market, goods are bought at one price and sold at a same price.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.