Which of the following statements about the law of one price is true?
A)It is most useful in assessing the true value of identical assets that are trading in more than one country.
B)It is a useful tool in determining the absolute value of an asset.
C)Empirical evidence suggests that it will provide the true value of an asset, except in those rare cases in which no comparable asset exists.
D)Although it rarely will provide an exact value for an asset, it will often provide a close approximation.

Question

Quizplus · Accepted Answer

The law of one price states that identical goods should have the same price in different markets, accounting for transportation costs and tariffs. Although it may not provide an exact value for an asset, it will often provide a close approximation. Therefore, option D is the correct choice. Option A is incorrect because the law of one price is useful for identical assets within a single market, not across different countries. Option B is incorrect because the law of one price is not used to determine the absolute value of an asset but rather to ensure that similar assets have similar prices. Option C is incorrect because empirical evidence suggests that the law of one price may not be accurate in various circumstances, including when no comparable asset exists. The law of one price states that identical assets should have the same price in all markets. While it may not always provide an exact value for an asset, it can often provide a close approximation. Therefore, choice D is the correct statement.

Which of the Following Statements About the Law of One