The exploitation of security mispricing in such a way that risk-free economic profits may be earned is called ___________.
A)arbitrage
B)capital asset pricing
C)factoring
D)fundamental analysis
E)none of the above

Question

Quizplus · Accepted Answer

The exploitation of security mispricing in order to earn risk-free economic profits is called arbitrage. This involves buying a security that is underpriced in one market and simultaneously selling it for a higher price in another market, thus earning a profit without taking on risk.

The Exploitation of Security Mispricing in Such a Way That