According to the theory of asset markets, if the interest rate is constant, then the competitive market price of a bottle of wine will rise at a constant rate per year until it is consumed, even if the amount that wine drinkers are willing to pay for it does not rise at a constant rate.

Question

Quizplus · Accepted Answer

This is because the price of the wine must rise at the rate of interest to compensate the owner for not selling it earlier and investing the proceeds at the interest rate. This is a reflection of the opportunity cost of holding onto the wine instead of selling it and investing the money.

According to the Theory of Asset Markets, If the Interest