Which of the following statement$($s$)$ regarding arbitrage is$/$are correct?

I$)$ The exploitation of security mispricing in such a way that risk$-$free economic profits may be earned is called arbitrage

II$)$ Once an arbitrage opportunity is discovered, the arbitrageur can make risk$-$free profits forever

III$)$ Once an arbitrage opportunity is discovered, the arbitrageur will most likely exploit the mispricing, causing it to disappear

IV$)$ The mechanism behind arbitrage explains how securities should end up priced correctly.

Question $10$ Answer

a$.$

Statements I, II$,$ and IV are correct

b$.$

Statements II$-$IV are correct

c$.$

None of the statements are correct

d$.$

All statements are correct

e$.$

Statements I, III, and IV are correct

f$.$

Statements I$-$III are correct