An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.
A)positive
B)negative
C)zero
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

In an arbitrage opportunity, the investor can construct a portfolio that will yield a sure profit without any risk. This means the portfolio’s expected return is greater than the risk-free rate, and therefore, the portfolio would not have a negative return. Additionally, a sure profit cannot be a positive or negative return, so choices A and B are incorrect. Therefore, the correct answer is C - zero.

An Arbitrage Opportunity Exists If an Investor Can Construct a __________