Which of the following situations is best described by the timeline shown below? |
You make payments of $250 per month for six months. |
If an arbitrage opportunity exists, an investor can act quickly in the hope of making a risk – free profit. |
True |
Dollar amounts received at different points in time cannot be compared in absolute terms. |
True |
Which of the following is the overarching principle that a financial manager should follow when making decisions? |
Decisions should increase the value of the firm to its investors. |
Why are arbitrage opportunities short – lived? |
Once investors take advantage of the opportunity, prices will respond so that the buying and selling price becomes equal. |
To calculate a cash flow’s present value (PV), you must compound it. |
False |
You are scheduled to receive $10,000 in one year. What will be the effect of an increase in the interest rate on the future value of this cash flow? |
It will have no effect on the future value. |
The Law of One Price states that if equivalent goods or securities are traded simultaneously in different competitive markets, they will trade for the same price in each market. |
True |
Whenever a good trades in a competitive market, the ________ determines the value of the good. |
price |