The equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state are reasonable if:
A)there is a constant variability.
B)any new information impacting prices is similar period to period.
C)interest or discount rates are constant.
D)Both A and C.
E)Both A and B.

Question

Quizplus · Accepted Answer

Option E is the best choice because it states that the equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state are reasonable where any new information impacting prices is similar period to period. This implies that there is a constant variability of prices, and interest or discount rates are constant. Therefore, both A and B are reasonable justifications for the equal rate of price change from each subsequent up state and fixed rate price change from each subsequent down state.

The Equal Rate of Price Change from Each Subsequent Up