Meb owns stock in two similar, large, financially sound corporations. Company A consistently earns rates of return of 12 percent per year, while company B regularly generates rates of return of 8
Percent per year. If Meb is attempting to arbitrage, he will
A) sell his stock in company B and buy more stock in company A.
B) sell his stock in company A and buy more stock in company B.
C) keep his portfolio balanced with an equal or nearly equal number of shares of each stock.
D) buy stock in other companies in an effort to diversify and minimize risk.
Correct Answer:
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