Which of These Help Prevent Arbitrage from Totally Correcting Market

question 7

Multiple Choice

Which of these help prevent arbitrage from totally correcting market mispricings?
I.Trading costs
II.Market domination by rational professionals
III.Number of amateur investors
IV.Near-term risk

• A)I only
• B)I and II only
• C)III and IV only
• D)I,III,and IV only
• E)I,II,III,and IV

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Definitions:

NPV

or Net Present Value, is a financial metric used to evaluate the profitability of an investment or project, calculating the difference between the present value of cash inflows and outflows.

Net Present Value

Calculating the variance between the present-day value of cash flows in and out over an established timeframe.

Average Accounting Return

The ratio of average net income to average invested capital, often used in financial analysis to assess investment attractiveness.

Profitability Index

A financial metric that calculates the ratio of the present value of future cash flows from an investment to the initial investment cost, used to evaluate the desirability of projects.