Assume that the Rome Electricity Company (REC) wishes to create a sponsored ADR program worth $320 million to trade its shares on the New York Stock Exchange. Also assume that REC is currently selling on the Borsa Italiana (the Italian Stock Exchange, in Milan) for 30 per share and that the current dollar/euro exchange rate is $1.23/. American Bank and Trust (ABT) is handling the ADR issue for REC and has advised REC that the ideal trading price for utility company shares on the NYSE is about $73.8 per share (or per ADR).

A. Assume that REC's stock price rises from 30 to 35 per share. If the exchange rate does not also change, what will happen to REC's ADR price? $ _____

B. If the euro appreciates from $1.23/ to $1.27/ but the price of REC's shares remains unchanged in euros, what will happen to REC's ADR price? $ _____