Saintleo MBA570 Module 2 Discussion Latest 2019 February Question # 00601116 Subject: Education Due on: 05/09/2019 Posted On: 05/09/2019 12:54 PM Tutorials: 1 Rating: 4.6/5
MBA570 Corporate Finance
Module 2 Discussion
The Law of
One Price states that equivalent investment opportunities trading in different
competitive markets will have the same price. Yet, one can find examples where
that rule seems to be violated. It is a well-known fact that Americans pay a
much higher price for most prescription drugs than people in most other
countries. Also, the price (when adjusted for exchange rates) for the same make
and model of automobile varies greatly across different countries. Furthermore,
the price of a barrel of crude oil varies between locations. For example, on
October 12, 2012, the price for Brent crude oil produced in Europe was $114.21
and the price for West Texas Intermediate (WTI) crude oil produced in Texas was
$91.86.
Do these
three cases demonstrate that the Law of One Price is false? Why or why not?
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