Final answer:
Riskless stock index arbitrage profit is not achievable if the future price of the index is less than the spot price adjusted for the cost of carry. High risk levels can detriment portfolios during downturns. Past high profits of a company do not guarantee high capital gains, as price often reflects these expectations.
Step-by-step explanation:
A riskless stock index arbitrage profit is not possible if the condition C. F0,T < S0(1 + rf - d)TE holds. This equation suggests that the future price of the index (F0,T) is less than the spot price of the index (S0) compounded at the risk-free rate (rf) minus the dividend yield (d) over the time to expiration (T). Essentially, this implies there's no room for arbitrage because the future contract is undervalued compared to the spot value adjusted for the cost of carry, which includes both the risk-free rate and the dividend yield.
Throughout history, high risk levels have often been detrimental to an investment portfolio, primarily because they can result in significant losses, especially during market downturns or economic crises. Furthermore, financial investors cannot earn high capital gains simply by buying companies with a demonstrated record of high profits because these expectations are generally already factored into the stock prices, leaving limited scope for above-average gains.