The Possibility of Arbitrage Arises When ________

question 78

Multiple Choice

The possibility of arbitrage arises when ________.

• A) there is no consensus among investors regarding the future direction of the market, and thus trades are made arbitrarily
• B) mispricing among securities creates opportunities for riskless profits
• C) two identically risky securities carry the same expected returns
• D) investors do not diversify

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Definitions:

Moral Consideration

Ethical values or principles that influence an individual’s decisions and actions, often guiding behavior in social and professional contexts.

Unliquidated Debt

Debt for which the exact amount owed has not been determined.

Accord And Satisfaction

A legal contract whereby two parties agree to discharge a tort claim, contract, or disputed claim by an agreement (the accord) and payment (the satisfaction) that differs from the original agreement.

Liquidated Debt

A fixed and settled debt amount that is acknowledged by both the debtor and the creditor.