Assume that two firms (Firm A and Firm B) are similar in all respects, but Firm A's stock has a higher rate of return than Firm B's stock.Arbitrage will occur as investors
A)sell Firm A's stock and buy Firm B's stock.
B)buy Firm A's stock and buy Firm B's stock also.
C)sell Firm A's stock and sell Firm B's stock also.
D)buy Firm A's stock and sell Firm B's stock.

Question

Quizplus · Accepted Answer

Investors will buy Firm A's stock to take advantage of the higher return and sell Firm B's stock, leading to arbitrage until the returns equalize.

Assume That Two Firms (Firm a and Firm B) Are