Which of the following is an arbitrage opportunity?

a. the bank offers you a loan at 4% interest and a savings account that pays 5% interest.
b. two stocks, one has expected return of 5%, the other 4%.
c. for every $1 you deposit today, the bank offers to pay you $1 in a year if the economy is bad and $2 in a year if the economy is good.
d. the bank offers you a loan at 5% interest and a savings account that pays 4% interest.

D. The bank offers you a loan at 4% interest and a savings account that pays 5% interest.

Explanation:

Arbitration is a financial strategy that consists of the price difference between different markets on the same financial asset to obtain an economic benefit, usually without risk.

To perform arbitration, complementary operations (buy and sell) are carried out at the same time and wait for prices to adjust. The arbitration takes advantage of this divergence and obtains a risk-free gain. In other words, the arbitrajista is positioned short (sells) in the market with higher price and long (purchase) in the market with lower price. The benefit would come from the difference between the two markets.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

answerbuying in bulk;