No-arbitrage condition say about the price on the south pole

Assignment Help Financial Management

Reference no: EM13731472

The stock PolarBear trades on both the South Pole Stock Exchange and the North Pole Stock Exchange.

(a) Suppose the price on the North Pole is $18. What does the No-Arbitrage Condition say about the price on the South Pole? (Assume no trading costs.)

(b) Suppose the price on the North Pole is $18 and the price on the the South Pole is $17? How can you make an arbitrage profit? (Assume no trading costs.)

(c) Suppose that the price on the North Pole is $18, that buying or selling on the North Pole costs $2, and that buying or selling on the South Pole is free. What does the No-Arbitrage Condition say about the price on the South Pole?

Reference no: EM13731472

Questions Cloud

Assuming the interest of the only finance charge : Assuming the interest of the only finance charge, how much interest would be paid on a $5000 investment loan to be repaid in 12 in 36 monthly instalments of $166.10? What is the APR on this loan?

Best to minimize her byron cost and maximize her flexibility : Bridget Morrow is a sophomore at a state college and is running out of money. Wanting to continue her education, Bridget is considering a student loan. Explain her options. How can she best to minimize her Byron cost and maximize her flexibility?

Taxable income-tax liability and tax refund or tax owed : Mary Watson is 24 years old and single lives in an apartment and has no dependents. Last year she earned 45,000 as a sales assistant for focus to business analytics: $3910 of her wages was withheld for federal income taxes. In addition, she had inter..

Zero-coupon bond is trading : Suppose that there are two securities RAIN and SUN. RAIN pays $100 in there is any rain during the next world cup soccer final. SUN pays $100 in there is no rain. Suppose that the world cup soccer final is 1 year from today (although this is not true..

No-arbitrage condition say about the price on the south pole : The stock PolarBear trades on both the South Pole Stock Exchange and the North Pole Stock Exchange. Suppose the price on the North Pole is $18. What does the No-Arbitrage Condition say about the price on the South Pole?

Use the cash for the expansion : Rexton Oil is an all-equity firm with 100M shares outstanding. Rexton has $150M in cash and expects future free cash flows of $65M per year. Management plans to use the cash to expand the firm's operations, which will in turn increase future cash fre..

What is the firms cost of equity : The Cracker Barrel has a beta of 0.98, a dividend growth rate of 3.2 percent, a stock price of $33 a share, and an expected annual dividend of $1.06 per share next year. The market rate of return is 11.2 percent and the risk-free rate is 3.7 percent...

After tax cost of debt : Lawler's is considering a new project. The company has a debt-equity ratio of 0.72. The company's cost of equity is 15.1 percent, and the after tax cost of debt is 7.2 percent. The firm feels that the project is riskier than the company as a whole an..

Assume these are zero-coupon bonds : Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 40 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.)

User Account

All Pages