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    Question

    Arbitrage trading will not be possible in which of the

    following cases? 
    A Markets are perfectly inefficient Correct Answer Incorrect Answer
    B Markets are partly inefficient Correct Answer Incorrect Answer
    C Markets are partly efficient Correct Answer Incorrect Answer
    D Markets are perfectly efficient Correct Answer Incorrect Answer
    E Arbitrage is always possible Correct Answer Incorrect Answer

    Solution

    Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists as a result of market inefficiencies.

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