Pricing in absence of arbitrage opportunity

Reference no: EM1336620

Consider the following prices from a McDonalds Restaurant:

Big mac sandwich $2.99
Large coke $1.39
Large Fry $1.09

A McDonalds Big Mac value meal consists of a Big Mac sandwich, large Coke, and a large fry. Assuming that there is a competitive market for McDonalds food items, at what price must a Big Mac value meal sell to insure the absence of an arbitrage opportunity and uphold the law of one price

1. $4.08
2. $4.38
3. $5.47
4. $5.77

Reference no: EM1336620

Questions Cloud

Impact of cultural diversity on law : Discuss the impact of cultural diversity on law enforcement practices. Identify and discuss trends in diversity in relation to the court and prison systems.

How to support the high bandwidth applications and growth : You have been contracted to create a network for a multimedia development firm that currently uses a 10-Mbps Ethernet network. The company requires a high-bandwidth network for the multimedia team, that constantly views and manipulates large files ..

Explain expert''s approach to- marketing management : Explain Expert's Approach to- Marketing management and Can you discuss your experience as either a consumer or professional with one of the data collection methods

Which subnet mask should you select : Your company is assigned the network address 150.50.0.0. You need to create seven subnets on the network. A router on one of the subnets will connect the network to the Internet. All computers on the network will need access to the Internet. What ..

Pricing in absence of arbitrage opportunity : A McDonalds Big Mac value meal consists of a Big Mac sandwich, large Coke, and a large fry. Assuming that there is a competitive market for McDonalds food items

Comparing statistical analysis : I am working on a graduate level paper about using "Discriminate Analysis and other models" in Bankruptcy prediction and having trouble understanding the basic concepts of the overall nature of this assignment.

Illustrate what will happen to the equilibrium level : Illustrate what will happen to the equilibrium level of income if investors become optimistic about the country's future and raise their investment.

Assess various scenarios as a part of developing forecasts : How is it helpful to assess various scenarios as a part of developing forecasts?

Which will be executed had these names : How would I write down a shell script to locate executable files? This script takes a list of file names from the command line and determines which would be executed had these names been given as commands.

User Account

All Pages