Suppose Hewlett-Packard (HPQ) stock is currently trading on the NYSE with a bid price of $28.00 and

Question:

Suppose Hewlett-Packard (HPQ) stock is currently trading on the NYSE with a bid price of

$28.00 and an ask price of $28.10. At the same time, a Nasdaq dealer posts a bid price for HPQ of $27.85 and an ask price of $27.95.

a. Is there an arbitrage opportunity in this case? If so, how would you exploit it?

b. Suppose the Nasdaq dealer revises his quotes to a bid price of $27.95 and an ask price of

$28.05. Is there an arbitrage opportunity now? If so, how would you exploit it?

c. What must be true of the highest bid price and the lowest ask price for no arbitrage opportunity to exist?

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Corporate Finance

ISBN: 9780137845071

6th Edition

Authors: Jonathan Berk, Peter DeMarzo

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Question Posted: Jun 12, 2024 01:04 AM

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Suppose Hewlett-Packard (HPQ) stock is currently trading on the NYSE with a bid price of $28.00 and

Question:

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Corporate Finance

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