Question
On the Tokyo Stock Exchange, Honda Motor Company stock closed at 3,945 per share on Thursday, April 11, 2013. Honda trades as and ADR on
On the Tokyo Stock Exchange, Honda Motor Company stock closed at ¥3,945 per share on Thursday, April 11, 2013. Honda trades as and ADR on the NYSE. One underlying Honda share equals one ADR. On April 11, 2013, the ¥/$ spot exchange rate was ¥99.8270/$1.00.
a. At this exchange rate, what is the no-arbitrage U.S. dollar price of one ADR?
b. By comparison, Honda ADRs traded at $39.97. Do you think an arbitrage opportunity exists?
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International Financial Management
Authors: Cheol S. Eun, Bruce G.Resnick
6th Edition
71316973, 978-0071316972, 78034655, 978-0078034657
