Define the law of one price carefully, noting its fundamentals assumptions. Why are these assumptions so difficult to apply in the real world in order to apply the theory

Q: Answer true or false to the follwoing statement, and explain “ Purchasing Power Parity (PPP) theory…

A: Buying power parity is a method of comparing the absolute purchasing power of currencies and, to…

Q: are the major assumptions made by economic order quantity (EOQ) model?

A: Step 1 Economic order quantity (EOQ) is the ideal order quantity a company should purchase to…

Q: For technical analysis, based on patterns of historical prices, to have value, ______ form of market…

A: Weak form efficiency market hypothesis is an element of efficient market hypothesis which states…

Q: Explain the law of one price in the perspective of the following: a) Purchasing power parity b)…

A: Law of One Price: It is stated in the law of one price that, in the absence of friction between…

Q: Differentiate between price risk and reinvestment risk.

A: Price risk is the risk of decline of the price of the investment or an asset after the underlying…

Q: What is the Joint Hypothesis and what are its implications for tests of asset pricing models?

A: The Capital Asset Pricing Model (CAPM) is a model that explains the relationship between expected…

Q: What should the price be?

A: Bond: It is a debt instrument issued by a firm to raise capital for expanding business operations.…

Q: what is price elasticity

A: Explaination:-   The price elasticity of desire is an economic statistic that measures the idea of…

Q: What are the differences between market ordersand limit orders?

A: Market orders might not be executed external of market times or if trading in a specific stock is…

Q: In general it argued that the lower of cost of market rule is supported most closely by which of the…

A: The lower of cost or market rule is related to valuing the inventory, the company should value the…

Q: What is meant by actuarially fair prices? What conditions will make Arrow-Debreu prices actuarially…

A: Fairtrade Minimum Price is defined as the minimum price, which used to get paid through the…

Q: Why might purchasing power parity fail to hold?

A: It refers to the relationship which indicates the same cost and same kinds of products in the market…

Q: Explain with examples that economic incentives are not as complex as we thought.

A: Economic incentives are given to motivate a person to take a particular course of action . Economic…

Q: Define predatory pricing, dumping, and collusive pricing.

A: Target Costing:Target costing refers to the cost that is ascertained as per the needs and wants of…

Q: A quantitative analysis enables a decision maker to put a “price” on the sum total of the…

A: Definition: Quantitative analysis: A quantitative analysis focuses on the factors in a decision…

Q: What is the principal objection to the payback method?

A: The Payback period is one of the traditional or non-discounting techniques of Capital budgeting. It…

Q: Discuss the assumptions, approach, estimation, benefits, limitations, and criticisms of Arbitrage…

A: Arbitrage Pricing Theory is a multi-factor pricing model. Arbitrage Pricing Theory can be used to…

Q: What is fundamental value or price?

A: Fundamental value is a measure of what an asset's worth. This gauge is acquired by methods for an…

Q: What is meant by the terms clean price and dirty price?

A: Clean price: The clean price is the price of a coupon bond does not comprise any accumulated…

Q: On what concept is the price-earnings multiple valuation approach based?

A: Price earning ratio is computed by dividing the market price of the share by the earnings per share.

Q: Which of the following statements regarding price elasticity is incorrect? a. A product with a…

A: a) In a perfectly inelastic demand the consumers are willing to pay any price for the product and so…

Q: What are the optimal prices and profits for selling the goods seperately?

A: Financial Management: Financial management comprises of two words i.e. Finance and management.…

Q: Describe three limitations of the economic, profitmaximizing model of pricing.

A: Profit maximizing price: The price for which the relative quantity is identified by the intersection…

Q: Does GAAP distinguish between fair values that are readily determinable from current market prices…

A: Generally Accepted Accounting Principles (GAAP):  A set of accounting principles, practices and…

Q: What does the lower-of-cost-or-market (LCM) rule require?

A: Lower-of-cost-or-market: The lower-of-cost-or-market (LCM) is a method which requires the reporting…

Q: Under what conditions is a market-based transfer price optimal?

A:

Q: According to our authors, explain the concept of “lower-of-cost-or-market.”

A: When a company prepares its financial statement, it reports certain items in the financial statement…

Q: What is market price?

A: The price for the business is the prevailing demand for the purchase or selling of an asset or…

Q: How does opportunity cost enter into a make or buy decision?

A: Opportunity Cost:   Opportunity Cost is the future capacity or potential advantage that can be…

Q: What’s the difference between the terms “intrinsic value” and “market price?” or in other words,…

A: Intrinsic value and market value are both used to value a firm's value. The intrinsic value of a…

Q: What is the fundamental argument behind using an opportunity cost as a discount factor in computing…

A: Opportunity cost: This term is very general and can be used on any normal day to day situation. For…

Q: Distinguish between the downward demand spiral and the ramifications of this for price choices

A: This question tells about  the downward demand spiral and the ramifications of this for price…

Q: What is the decision rule for payback?

A: Payback period is the period of time taken by the project to recover the investment in such project…

Q: Why do you think that having a price structure important?

A: Pricing strategies are the methods companies use to price products and services. Almost all…

Q: Purchasing Power Parity (PPP) theory fails to explain the facts. explain whether true or false

A: Buying power parity is a method of comparing the absolute purchasing power of currencies and, to…

Q: How can I explain the rationale behind the Arbitrage Pricing Theory (APT) model, and discuss its…

A: The Arbitrage Pricing Theory (APT) model is the asset pricing model that considering the difference…

Q: What two arguments tend to justify classifying all costs as either fixed or variable even though…

A: Costs are the expenses which are spent by the manufacturing entity to perform its operations or…

Q: Briefly explain law of one price with respect to the arbitrage pricing theory.

A: Arbitrage Pricing Theory: It is the multi-factor model that expresses the relationship between…

Q: 1. What’s the difference between fundamental analysis and technical analysis?  Don’t simply define…

A: Since, there are more than one question is posted at a time, the answer for first question is only…