In the APT model the idea of riskless arbitrage is to assemble a portfolio that
A) requires some initial wealth, will bear no risk, and still earn a profit.
B) requires no initial wealth, will bear no risk, and still earn a profit.
C) requires no initial wealth, will bear no systematic risk, and still earn a profit.
D) requires no initial wealth, will bear no unsystematic risk, and still earn a profit.
E) requires some initial wealth, will bear no systematic risk, and still earn a profit.

Question

Quizplus · Accepted Answer

The APT model (Arbitrage Pricing Theory) suggests that it is possible to construct a portfolio that requires no initial wealth, bears no risk, and still earns a profit through riskless arbitrage. This is achieved by exploiting mispriced assets in the market.

In the APT Model the Idea of Riskless Arbitrage Is