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Consider two securities, A & B. Suppose a third security, C, has the same cash flows as A and B ...

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Consider two securities, A & B. Suppose a third security, C, has the same cash flows as A and B ...

Consider two securities, A & B. Suppose a third security, C, has the same cash flows as A and B combined. Given this information about securities A,B, & C, which of the following statements is INCORRECT?
A) If the total price of A and B is cheaper than the price of C, then we could make a profit selling A and B and buying C.
B) Price(C) = Price(A) + Price(B).
C) Because security C is equivalent to the portfolio of A and B, by the law of one price they must have the same price.
D) The relationship known as value additivity says that the value of a portfolio is equal to the sum of the values of its parts.

Textbook

Corporate Finance: The Core

Edition: 4^th

Authors: Berk, DeMarzo

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