The equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state are reasonable if:
A) there is a constant variability.
B) any new information impacting prices is similar period to period.
C) interest or discount rates are constant.
D) Both there is a constant variability and interest or discount rates are constant.
E) Both there is a constant variability and any new information impacting prices is similar period to period.

Question

Quizplus · Accepted Answer

A constant variability suggests that price changes are consistent over time, while similar new information impacting prices period to period implies that changes in price are influenced by similar factors each time. Together, these conditions suggest that the rate of price change from each subsequent up state and fixed rate price change from each subsequent down state would be reasonable. The other options (A, B, C, and D) do not necessarily support this conclusion.

The Equal Rate of Price Change from Each Subsequent Up