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ABC is an ETF that has three stocks in its portfolio: Apple, Boeing, and Costco. Apple's price is $125/share, Boeing is priced at $230/share, and
ABC is an ETF that has three stocks in its portfolio: Apple, Boeing, and Costco. Apple's price is $125/share, Boeing is priced at $230/share, and Costco's price is $370/share. Suppose ABC holds an equal number of shares of each stock in its portfolio, and ABC does not have any liabilities. ABC's NAV is $720 per share. Now ABC's share price has dropped to $715 per share. Which of the following actions should APs (authorized participants) take? If each unit has 100,000 ABC shares, what is the total profit per unit? The AP should buy ABC shares in the stock market, and sell Apple, Boeing, and Costco shares in the stock market. The profit per unit is $5. The AP should buy ABC shares in the stock market, then exchange the ABC shares with the ABD fund issuer to receive Apple, Boeing, and Costco shares. The last step is to sell those Apple, Boeing, and Costco shares in the stock market. The profit per unit is $500,000. The AP should buy Apple, Boeing, and Costco shares in the stock market, then exchange those shares with the ABD fund issuer to receive ABC shares. The last step is to sell the ABC shares in the stock market. The profit per unit is $500,000. The AP should buy Apple, Boeing, and Costco shares in the stock market, and sell ABC shares in the stock market. The profit per unit is $500,000. The AP should buy ABC shares in the stock market, and sell Apple, Boeing, and Costco shares in the stock market. The profit per unit is $500,000
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