A McDonald's Big Mac value meal consists of a Big Mac sandwich, large Coke, and a large fries. Assuming that there is a competitive market for McDonald's 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? A) S4.08 B) $4.62 C) $5.44 D) $6.80 22) Walgreens Company (NYSE: WAG) is currently trading at $48.75 on the NYSE. Walgreens Company is also listed on NASDAQ and assume it is currently trading on NASDAQ at $48.50. Does an arbitrage opportunity exist and, if so, how would you exploit it and how much would you make on a block trade of 100 shares? A) No, no arbitrage opportunity exists. B) Yes, buy on NASDAQ and sell on NYSE, make $25. C) Yes, buy on NYSE and sell on NASDAQ, make $25. D) Yes, buy on NASDAQ and sell on NYSE, make $250. 23) A 2013 Toyota Camry can be bought in Buffalo, NY, for $18,620. The same model Camry can be purchased across the Canadian border in Hamilton, ON. If cars could be freely traded across the border, what would be the expected price of a 2013 Toyota Camry in Hamilton in Canadian dollars, given that SI U.S. is equal to $0.92 Canadian? A) $17,130 B) S24.287 C) 520,239 D) $28,335 24) Cronus Airlines has a contract that gives them the opportunity to purchase up to 13,000,000 gallons of jet fuel at $2.00 per gallon. The current market price of jet fuel is $2.3 per gallon. Cronus believes they will only need 4,000,000 gallons of jet fuel. What is the value of this opportunity? A) $1.200.000 B) $3.900.000 C) $2.700.000 D) $9.000.000 The Time Value of Money and Interest Rates 25) A lender lends $10,100, which is to be repaid in annual payments of $2070 for 6 years. Draw the timeline of the loan from the lender's perspective? A) Year! Year 2 Year 3 Year 4 Year 5 Year 6 -S10,100 S2070 2070 2070 $2070 2070 B) Year 1 Year 2 $2070 Year 3 2070 Year 4 2070 Year 5 2070 Year 6 2070 Year Year 1 S10.100 $2070 Year 2 $2070 Year 3 $2070 Year 4 2070 Year 3 2070 Year 6 $2070 D) Year 0 Year! $10,100 $2070 Year 2 S4070 Year 3 S6070 Year 4 $8070 Year 5 $10,070 Year 6 S12.070 26) A tenant wants to lease a building for $50,000 per year. She signs a five-year rental agreement that states that she will pay $25.000 every six months for the next five years. Draw the timeline for her rental payments. assuming she makes the first payment immediately? 27) If the interest rate is 9%, the one-year discount factor is equal to A) 0.090 B) 1.090 C) 0.917 D) 0.981 . 28) A) 3.0% If the one-year discount factor is equal to 0.94340, the interest must be equal to B) 4.8% C) 5.5% D) 6.0%