What is the no arbitrage us dollar price of one adr

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On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥2,717 per share on Thursday, July 29.2010. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On July 29, 2010, the ¥/$ exchange rate was ¥86.7750/$1.00.

a. At this exchange rate, what is the no-arbitrage U.S. dollar price of one ADR?

b. By comparison, Honda ADRs traded at $30.96. Do you think an arbitrage opportunity exists?

Reference no: EM131115377

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