Question
Two economists are walking down the street. One spots a $100 bill on the ground. Hey, he says to his friend, There's a hundred bucks
Two economists are walking down the street. One spots a $100 bill on the ground.
"Hey," he says to his friend, "There's a hundred bucks lying on the ground!"
"Don't be silly," the other replies, "If there were a hundred dollars on the ground, someone would have picked it up already!"
The two economists keep walking down the street.
(a)If the bill was real, is this an arbitrage strategy? Explain.
(b)Why the economists' decision to keep walking make sense? What is a counter argument to the economists' decision?
(c)Consider securities A, B and C below.
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