Consider an arbitrage strategy involving share-classes A and B of stock X. Stock X-A is trading at $75 and X-B is trading at $100. Suppose that you short-sell $150,000 of the relatively expensive share X-B, and buy $150,000 of the relatively cheaper X-A. In which of the following situations will you make a positive return on your investment (ignoring trading costs and financing costs)? Choose all that apply. You can assume that the arbitrageur closes the long and short positions after observing the prices below so that any profits/losses are realized. Choose all that apply (multiple answer).

	A.	The stock price for X-A increases to $100 and X-B remains at $100.
	B.	The stock price for X-B decreases to $75 and X-A remains at $75.
	C.	The stock price for X-A and X-B converge at $87.5
	D.	The stock price for X-A increases to $95, and the stock price for X-B increases to $105.
	E.	The stock price for X-A decreases to $70 and the stock price for X-B decreases to $80.
	F.	The stock price for X-A decreases to $70 and X-B increases to $105.

Continuing from Q1. Suppose that the margin requirements for long positions are 40 %, and the maintenance margin is 25 %. How far can the long positions decline in value before the investor receives a margin call?

	A.	The dollar value of long positions can decline from $150,000 to $30,000
	B.	The dollar value of long positions can decline from $150,000 to $37,500
	C.	The dollar value of long positions can decline from $150,000 to $112,500
	D.	The dollar value of long positions can decline from $150,000 to $120,000

Continuing from Q1. Suppose that the margin requirements for short positions are 40 %, and the maintenance margin is 30 %. How far can the short positions increase in value before the investor receives a margin call?

	A.	The dollar value of short positions can decline from $150,000 to $210,000
	B.	The dollar value of short positions can increase from $150,000 to $161,538
	C.	The dollar value of short positions can decline from $150,000 to $200,000
	D.	The dollar value of short positions can decline from $150,000 to $175,000
	E.	The dollar value of short positions can decline from $150,000 to $174,721