3. Each Nokia ADR on the New York Stock Exchange is equivalent to 1 share of...
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3. Each Nokia ADR on the New York Stock Exchange is equivalent to 1 share of Nokia Corp. on the NASDAQ Helsinki Stock Exchange. The exchange rate for the Euro (which is the currency used for Finland) is $1.102731/. The current price of Nokia Corp. in Finland is 3.45. a. Calculate the expected price of the Nokia ADR. b. The Nokia ADR is currently trading at $3.87. Based on this, and ignoring transaction costs, briefly explain what should happened to: i. Demand for Nokia stock ii. Supply of Nokia stock iii. Demand for Nokia ADRs iv. Supply of Nokia ADRs C. [Extra credit, 2 points] Assuming only the Nokia stock price adjusts, calculate the Nokia stock price that would result in equilibrium between Nokia stock and Nokia ADRs. 4 3. Each Nokia ADR on the New York Stock Exchange is equivalent to 1 share of Nokia Corp. on the NASDAQ Helsinki Stock Exchange. The exchange rate for the Euro (which is the currency used for Finland) is $1.102731/. The current price of Nokia Corp. in Finland is 3.45. a. Calculate the expected price of the Nokia ADR. b. The Nokia ADR is currently trading at $3.87. Based on this, and ignoring transaction costs, briefly explain what should happened to: i. Demand for Nokia stock ii. Supply of Nokia stock iii. Demand for Nokia ADRs iv. Supply of Nokia ADRs C. [Extra credit, 2 points] Assuming only the Nokia stock price adjusts, calculate the Nokia stock price that would result in equilibrium between Nokia stock and Nokia ADRs. 4
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