Why Are Arbitrage Opportunities Short-Lived

question 83

Multiple Choice

Why are arbitrage opportunities short-lived?

• A) Federal regulations will kick in to restrict trade and effectively shut the opportunity down.
• B) Prices will fluctuate up and down as traders take advantage of the opportunity, resulting in the net present value (NPV) fluctuating between positive and negative values.
• C) Once investors take advantage of the opportunity, prices will respond so that the buying and selling price become equal.
• D) Arbitrage opportunities need a lot of information processing, which is very slow to arrive.

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Definitions:

Auditing Procedures

The methods and tests auditors use to gather evidence and evaluate the validity of a company's financial statements.

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A set of moral principles that guide the behavior of individuals and organizations, ensuring actions align with societal, professional, and individual standards of conduct.

Standards Of Conduct

Guidelines or rules designed to direct the behavior and decision-making of members within an organization or profession.

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A term that might refer to the various steps or measures taken by an individual or organization; however, in a specific accounting or financial context, it's too vague without further qualification.