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alexira [117]
3 years ago
6

In the London market, Rolls-Royce stock closed at £0.875 per share. On the same day, the British Pound sterling to the U.S. doll

ar spot exchange rate was £0.6366/$1.00. Rolls Royce trades as an ADR in the OTC market in the United States. Five underlying Rolls-Royce shares are packaged into one ADR. If the Rolls Royce ADRs were trading at $5.75 when the underlying shares were trading in London at £0.875, ignoring transaction costs, the arbitrage trading profit would be A. $0.00. B. $1.12. C. $2.12. D. $3.12.
Business
1 answer:
frutty [35]3 years ago
5 0

Answer:

B. $1.12

Explanation:

The computation of arbitrage trading profit is shown below:-

Euro Share price = £0.875

Spot rate R = £0.6366/$1.00

1 ADR Share price in US = $5.75

1 ADR = 5 share of shares

Now, The actual price of 1 ADR P1 = 5 × Euro Share price ÷  Share price in US

= 5 × £0.875 ÷ £0.6366

= $6.87

Therefore, The  Arbitrage profit = Actual price - trading price

= Actual price - Price in US

= $6.87 - $5.75

= $1.12

Therefore for computing the arbitrage trading profit we simply applied the above formula.

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Answer:

Mixed economics place some limits for safety and society.

Some traits most mixed economies have in common:

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-the economy is usually driven by private self-interest and incentives.

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4 years ago
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3 years ago
False Value Hardware began 2018 with a credit balance of $23,000 in the allowance for sales returns account (i.e., the estimated
defon

Answer:

balance in sales returns account = $18200

Explanation:

given data

credit balance = $23,000

Sales = $680,000

cash collections = $720,000

returned = 4%

credit = $32,000

to find out

balance in the allowance for sales returns account

solution

we get here estimates for returns that is

estimates for returns = 4% of $680,000

estimates for returns = $27200

so

balance in the allowance for sales returns account will be express as

balance in the allowance for sales returns account = credit balance + estimates for returns - credit    ....................1

put here value we get

balance in sales returns account = $23,000 + $27200 - $32,000

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3 years ago
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3 years ago
11) Domergue Corp. currently has an EPS of $3.76, and the benchmark PE for the company is 21. Earnings are expected to grow at 5
balandron [24]

Answer:

(a) 78.96

(b) 82.99

(c) 5.10

Explanation:

The current stock price can be calculated as follows

= 3.76 × 21

= 78.96

The target stock price in one year can be calculated as follows

= 3.76(1+5.1%)×21

= 3.76×(1+0.051)×21

= 3.76×1.051×21

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The implied return on company's stock over one year can be calculated as follows

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3 years ago
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