Explanation:
The value in U.S. dollars of ABC as traded on the HKEX is $43.90 (= HKD341.65 × 0.1285). An arbitrageur could buy the shares on the HKEX for $43.90 per share and sell them on the NYSE for $45. This creates a potential arbitrage profit of $1.10 (= $45 – $43.90) to a U.S.-based investor.
(Book 3, Module 30.2, LO 30.h)
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Question 84
There is a potential arbitrage opportunity in the stock of ABC, Inc. They trade on the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange (HKEX). The stock is trading at USD45 on the NYSE and at HKD341.65 on the HKEX. The current exchange rate is 0.1285 USD per HKD. What is the potential arbitrage profit per share for a U.S. dollar-denominated investor?
A
$0.89.
B
$1.07.
C
$1.10.
D
$1.57.
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