Buying a share because I think the price will go up is an example of an arbitragetrade:A. TrueB. False
Question
Buying a share because I think the price will go up is an example of an arbitrage trade:
- A. True
- B. False
Solution
Analyzing the Statement
-
Understanding Arbitrage: Arbitrage involves simultaneously buying and selling an asset in different markets to profit from price differences. It requires discrepancies in pricing that can be exploited without risk.
-
Buying a Share with Expectation: Buying a share because you believe the price will increase is a form of investment speculation, not arbitrage. Speculation involves taking a position based on expected future price movement rather than taking advantage of price differences across markets.
Conclusion
Given that arbitrage involves no risk and focuses on price differences, while buying shares based on future price expectations is speculative, the statement is false.
Final Answer
B. False
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