question
A COMPETITIVE MARKET is...
answer
...one in which a good can be bought and sold at the same price
- in a competitive market, the price determines the value of the good
- in a competitive market, the price determines the value of the good
question
According to the VALUATION PRINCIPLE...
When the value of the benefits exceeds the value of the costs...
When the value of the benefits exceeds the value of the costs...
answer
...the decision will increase the market value of the firm
question
Arbitrage
answer
the practice of buying and selling equivalent goods to take advantage of a price difference
question
Arbitrage Opportunity
answer
any situation in which it is possible to make a profit without taking any risk or making any investment
question
Interest Rate (r)
answer
the rate at which money can be borrowed or lent over a given period
question
How do you calculate the CASH VALUE?
answer
(Product amount) * (Market Price) = Cash Value
question
How to calculate NPV
answer
PV(Benefit) - PV(Cost) = NPV
question
Law of One Price
answer
in competitive markets, identical assets will have the same price
question
Law of One Price: in competitive markets, identical assets will have the same price BECAUSE...
answer
BECAUSE... if they don't, investors will take advantage of arbitrage opportunities and eliminate the price difference
question
interest rate factor ( 1 + r)
answer
it is the rate of exchange between dollars today and dollars in the future
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
