The states that
A)assets that are equivalent have the same risk.
B)if two assets are equivalent in all economically relevant respects, then they should have the same market price.
C)risk and return are directly related.
D)there are always arbitrage opportunities.

Question

Quizplus · Accepted Answer

This statement reflects the concept of the law of one price, which states that if two assets are identical in all economically relevant respects, they should have the same market price. This statement assumes that investors are rational and will not pay more for an identical asset. Choices A and C are false statements as assets that are equivalent may have different levels of risk and the relationship between risk and return is not always straightforward. Choice D is also false as there may not always be arbitrage opportunities.

The States That