If Index Futures Are Priced ____ Relative to the Stocks

question 35

Multiple Choice

If index futures are priced ____ relative to the stocks representing the index, an arbitrageur may ____ index futures and simultaneously ____ stocks.

• A)low; purchase; sell
• B)low; sell; purchase
• C)high; purchase; sell
• D)Answers B and C are correct.
• E)None of the above are correct.

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Definitions:

Information Overload

The state of being overwhelmed by the amount of information one receives, making it difficult to process, understand, or make decisions.

Moderately High Information Richness

Refers to communication mediums or messages that have a high level of detail and can convey complex information effectively, though not at the highest possible level of richness.

Work Stress

The adverse reaction people have to excessive pressures or other types of demand placed on them at work, leading to physical and emotional stress.

Mum Effect

The tendency of people to withhold negative or undesirable information to avoid uncomfortable situations or negative consequences.