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:

Job Characteristics Model

A framework suggesting that job design should consider five core dimensions (skill variety, task identity, task significance, autonomy, and feedback) to enhance employee motivation, satisfaction, and performance.

Freedom

The power or right to act, speak, or think as one wants without hindrance or restraint.

Telecommuting

A work arrangement in which employees do not commute to a central place of work but rather perform their job duties remotely, typically from home, using digital communication tools.

Flexibility

The willingness or ability to change or adapt according to different circumstances or requirements.