The buying and selling process that leads proﬁt-seeking investors to equalize average expected rates of return from identical assets is known as
A) diversiﬁcation.
B) arbitrage.
C) hedging.
D) securitization.

Question

Quizplus · Accepted Answer

The process described in the question, where investors equalize expected rates of return from identical assets, is known as arbitrage. Diversification refers to spreading investments across different assets to reduce risk. Hedging involves investing in two assets with opposite price movements to reduce overall risk. Securitization is the process of converting illiquid assets into tradable securities.

The Buying and Selling Process That Leads Proﬁt-Seeking Investors to Equalize