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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
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 2 shares of Hewlett-Packard (HPQ), 1 share of Sears (SHLD), and 3 shares of General Electric (GE). Suppose the current stock prices of each individual stock are as shown here: a. What is the price per share of the ETF in a normal market? b. If the ETF currently trades for $120, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.) c. If the EFT currently trades for $150, what arbitrage opportunity is available? What trades would you make? (Ignore any transaction costs.) a. What is the price per share of the ETF in a normal market? The price per share of the ETF in a normal market is W (Round to the nearest dollar.)
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