Question: Business Objects trades on the Paris Bourse as ordinary shares and on the NASDAQ as American Depositary Receipts (ADRs). One ADR of Business Objects corresponds

Business Objects trades on the Paris Bourse as ordinary shares and on the NASDAQ as American Depositary Receipts (ADRs). One ADR of Business Objects corresponds to one share on the Paris Bourse. Suppose the last transaction of Business Objects on the Paris Bourse was at €25. An investor then entered on the French electronic trading system a limit order to purchase Business Objects shares at €24. The ADR price quoted by a NASDAQ dealer is $23.90-24.45. The exchange rate is $0.96/€. Suppose that some unfavorable information suddenly arrives that suggests that a lower price of Business Objects shares at €21 would be fair. Assuming that the exchange rate has not changed, discuss which parties stand to lose on the Paris Bourse and on NASDAQ?

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