Do you think an arbitrage opportunity exists

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Reference no: EM132031570

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 on 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?

By comparison, Honda ADRs traded at $39.97. Do you think an arbitrage opportunity exists?

Reference no: EM132031570

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