Determining an ArbitrageOpportunity[WLO: 3] [CLOs: 4, 8] Go to...

Question

Determining an ArbitrageOpportunity[WLO: 3] [CLOs: 4, 8]

Go to https://www.adr.com/Investors/Markets(Links to an external site.). Look up the price of a Honda ADR. Next, look up the price of a share of Honda stock on the Tokyo Stock Exchange. Next, look up the exchange rate of Yen/Dollar. Address the following questions:

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

When comparing the Honda ADR to the price of a share of Honda stock priced in Yen, does an arbitrage opportunity exist?

If you were to develop a plan to make a trading profit,

Provide calculations where necessary to support your answer. Summarize your findings in a two page paper, not including title and references pages. Be sure to properly cite your resources using APA style.

The Week 4 Assignment

Must be two double-spaced pages in length, and formatted according to APA style as outlined in the Ashford Writing Center.
Must include a title page with the following:
- Title of paper
- Student’s name
- Course name and number
- Instructor’s name
- Date submitted
Must begin with an introductory paragraph that has a succinct thesis statement.
Must address the topic of the paper with critical thought.
Must end with a conclusion that reaffirms your thesis.
If you use references, you must document all sources in APA style, as outlined in the Ashford Writing Center.
Must include a separate references page, formatted according to APA style as outlined in the Ashford Writing Center.

Preeta · Accepted Answer

DETERMINING AN ARBITRAGE OPPORTUNITY
[Type the company name]
DETERMINING AN ARBITRAGE OPPORTUNITY
Title of paper
Student’s name
Course name and
Number
Instructor’s name
Date submitted
Introduction:
There are several different segments for national security markets as well as international security markets. Different countries have different currencies and often the value of currency of each nation varies. The reason of variable in value of each currency is due to different economic conditions and different fiscal and monetary policies. 
Industrial activities in a particular nation are also affected by these factors. So, even the securities behave differently in different nations. So, ultimately security returns are also depends upon the domestic factors. Exchange rates are being used to convert one currency to another. 
Arbitrage is the mechanism of buying and selling of securities in different stock markets and taking the advantage of the difference in exchange rate. The imbalance can be capitalized and profit can be made on per unit of shares (Zaremba, 2016). 
In this report,

Determining an ArbitrageOpportunity[WLO: 3] [CLOs: 4, 8] Go to https://www.adr.com/Investors/Markets(Links to an external site.). Look up the price of a Honda ADR. Next, look up the price of a share...

Determining an ArbitrageOpportunity[WLO: 3] [CLOs: 4, 8]

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