Final answer:
The statement is true; an arbitrage opportunity allows an investor to make a risk-free profit by exploiting price differences across markets. These opportunities are usually short-lived and require rapid action, and are less common due to market efficiency and technology.
Step-by-step explanation:
If an arbitrage opportunity exists, an investor can indeed act quickly with the hope of making a risk-free profit. The statement is True. Arbitrage involves the process of buying and selling goods, securities, or currencies in different markets or in derivative forms to take advantage of differing prices for the same asset. Arbitrage opportunities arise when the price of the same asset, such as a share or a currency, varies across different markets or exchanges.
For example, if a currency is valued differently on two foreign exchange markets, a trader can buy the currency at the lower price and sell it at the higher price, thus making a profit from the price discrepancy. Another example would be a scenario where a company's stock is traded on two stock exchanges and there is a price difference between the two. An arbitrageur could buy the stock at the lower price and sell it at the higher price, exploiting the inefficiency in pricing.
However, these opportunities are often short-lived, as the act of arbitraging the price differences will influence supply and demand, leading to a convergence of prices across markets. Advanced technology and high-speed communications have largely increased market efficiency, making such opportunities rarer and requiring quick action when they are found.