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The assumption of arm's-length transaction states that: A. both parties to a transaction can act independently of each other and make economically rational decisions. B. both parties to a transaction must have had previous transactions.C. one of the parties to the transaction is a bank that has full knowledge of the firm's creditworthiness. D. none of these.

Answer :

Answer:

A. both parties to a transaction can act independently of each other and make economically rational decisions.

Explanation:

According to the belief of arm's-length transaction, OPTION (A) is correct.

Because an arm's length transaction is a kind of a business trading  in this the consumers as well as the trader are given that much freedom, that they can act with freedom in an independent way.

And also in this type of transaction, both of them do not  carry any relationship; here both of them implies the consumer and the trader.

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