Question: You have used APT to construct a model to determine that the theoretical values of stock X, Y and Z are all $16. Suppose that

  1. You have used APT to construct a model to determine that the theoretical values of stock X, Y and Z are all $16. Suppose that you have reliable information that next year the prices for Stocks X, Y, and Z are likely to be $12.00, $18.25, and $14.50. Determine the amount of profit that could be made using an arbitrage strategy.

    A.

    $2.25
    B.

    $10
    C.

    $129
    D.

    $169
    E.

    None of the above.

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