Arbitrage opportunities are likely to be exploited except when:

• a)there is small price differential between assets.
• b)investments can be executed in large volumes.
• c)an illiquid position exists.
• d)there is substantially large price discrepancies between financial instruments.

Under which of the following conditions will an arbitrageur certainly execute a trade?

• a)When short positions are associated with high cost.
• b)When associated transaction costs are low.
• c)When the underlying asset makes no income payment.
• d)When the law of one price generally holds.

Futures contract prices are most likely ___________ when interest rates are constant

• a)greater than forward prices
• b)less than forward prices
• c)equal to forward prices
• d)preferred by investors