For heavily traded assets like stocks and bonds, arbitrage
A) will equalize rates of return across all stocks and bonds.
B) will drive up rates of return on all assets.
C) is a lengthy process because of the large volume of transactions.
D) will often equalize rates of return among similar assets within minutes.

Question

Quizplus · Accepted Answer

Arbitrage takes advantage of pricing discrepancies between similar assets, and as soon as these discrepancies arise, traders will move quickly to capitalize on them. This can lead to the equalization of rates of return among similar assets within minutes. However, heavily traded assets like stocks and bonds are subject to constant fluctuations, so arbitrage opportunities may arise frequently, and the process of constantly seeking these opportunities can be time-consuming.

For Heavily Traded Assets Like Stocks and Bonds, Arbitrage