Which of the following is an example of arbitrage?
A) An inventor of a new hydrocarbon cracking technology based on palladium buys this metal knowing that its price will rise when the technology is adopted.
B) A metals merchant is offered $108,000 in one year for $100,000 of palladium today, when the interest rate is 10%.
C) An investor, seeing that the price of palladium on the metals exchange in two different countries is slightly different, buys on one and sells on the other to make a profit.
D) A firm buys $250,000 of palladium today, with an option to sell it at $275,000 in one year if interest rates rise above 10%.
Answer: C
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The equity-premium puzzle refers to the surprising result that
A. stock prices are inversely related to interest rates. B. the transactions costs for buying stocks may be as high as 5 percent of the total value of those stocks, greatly reducing the net returns to stocks. C. equity prices are much too high when compared with the fundamental value of the stock market, as determined by using the present-value formula. D. people will not pay to avoid risk in everyday situations, but when it comes to the stock market, people are willing to give up large potential returns to stocks in order to buy safer Treasury securities.
The entry that includes a debit to Payroll Taxes and Benefits Expense also includes credits to Federal Unemployment Tax Payable and State Unemployment Tax Payable
Indicate whether the statement is true or false
All of the following accounts have normal debit balances except:
A) Accounts receivable B) Dividends C) Supplies expense D) Service revenue
In the resource-based view of the firm, examples of tangible resources include
A. financial resources, physical resources, and technological resources. B. financial resources, human resources, and firm competencies. C. outstanding customer service, innovativeness of products, and reputation. D. financial resources, physical resources, and the capacity to combine intangible resources.