Risk-free arbitrage is important to all areas of finance and particularly capital budgeting. Most activities in reality that are called "arbitrage" are actually "risky arbitrage" such as the simultaneous selling of an acquiring company's stock and the buying of a target company's -- after an announced merger or acquisition. Give an example of arbitrage in finance and comment on the inherent or underlying risk.

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Riskfree arbitrage in an economy is riskfree profitmaking with the aid of fluctuati... View the full answer