Arbitrage p 81 arbitrage opportunity p 81 law of one

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Unformatted text preview: should exist. ◗ The price of a security should equal the present value of the expected future cash flows obtained from owning that security. arbitrage, p. 81 arbitrage opportunity, p. 81 Law of One Price, p. 82 transactions costs, p. 83 MyFinanceLab Study Plan 3.6 Review Questions 1. What makes an investment decision a good one? 2. How important are our personal preferences in valuing an investment decision? 3. Why are market prices useful to a financial manager? 4. How does the Valuation Principle help a financial manager make decisions? 5. Can we directly compare dollar amounts received at different points in time? 6. How is the net present value decision rule related to cost-benefit analysis? 7. If there is more than one project to take, how should the financial manager choose among them? 8. What is the relation between arbitrage and the Law of One Price? Problems All problems in this chapter are available in MyFinanceLab. An asterisk (*) indicates problems with a higher level of difficulty. Cost-Benefit A...
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This note was uploaded on 02/07/2014 for the course MIS 304 taught by Professor Mejias during the Spring '07 term at Arizona.

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