An Exchange Traded Fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of 22 sharesshares of Hewlett-Packard (HPQ), 11 shareshare of Sears (SHLD), and 44 shares of General Electric (GE). Suppose the current stock prices of each individual stock are as shown here:

Stock Current Market Price

HPQ $ 29

SHLD $35

GE $17

a. What is the price per share of the ETF in a normal market? (round to the nearest dollar)

b. If the ETF currently trades for $143, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.)

c. If the EFT currently trades for $173, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.)