"If equivalent investment opportunities trade simultaneously in different competitive markets,then they must trade for the same price in both markets." What do we call the above statement?
A)the Net Present Value rule
B)the Law of One Price
C)the Valuation Principle
D)the time value of money
E)an arbitrage opportunity

Question

Quizplus · Accepted Answer

The statement is referring to the Law of One Price, which states that if the same asset or investment opportunity is available in multiple competitive markets, it should have the same price in all those markets. This reflects the efficient functioning of markets as investors seek to profit from any price discrepancies and arbitrage them away. The other options are not relevant to this statement - the Net Present Value rule relates to discounting future cash flows, the Valuation Principle emphasizes the importance of understanding the drivers of value, and the time value of money relates to the idea that money available now is worth more than the same amount in the future due to potential earnings or inflation. An arbitrage opportunity would only arise if the Law of One Price were not being met.

"If Equivalent Investment Opportunities Trade Simultaneously in Different Competitive Markets,then