On the Tokyo Stock Exchange, Honda Motor Company stock closed at 3,945 per share on Thursday, April
Question:
On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥3,945 per share on Thursday, April 11, 2013. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On April 11, 2013, the ¥/$ exchange rate was ¥99.8270/$1.00.
a. At this exchange rate, what is the no-arbitrage U.S. dollar price of one ADR?
b. By comparison, Honda ADRs traded at $39.97. Do you think an arbitrage opportunity exists?
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Usman Nasir
I did Master of Commerce in year 2009 and completed ACCA (Association of Chartered Certified Accountants) in year 2013. I have 10 years of practical experience inclusive of teaching and industry. Currently i am working in a multinational company as finance manager and serving as part time teacher in a university. I have been doing tutoring via many sites. I am very strong at solving numerical / theoretical scenario-based questions.
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