CFA Practice Question

There are 206 practice questions for this study session.

CFA Practice Question

According to the no-arbitrage principle, in a well-functioning market an arbitrage profit would result from ______.
A. irrational pricing
B. inflation
C. increased demand
Explanation: An arbitrage profit would result from similar goods having markedly different prices on two different markets. This pricing is irrational. A particular good should have the same price on all markets.

User Contributed Comments 3

User Comment
Tanou I don't really understand why pricing could irrational in a well-functioning market...
jejasin Yeah...that is weird. I just memorized that arbitrage happens when prices are mismatched in different markets
Inaganti6 happens in commodity markets in fact that's the only reasons commodity trading firms exist
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