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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