Question
On the Tokyo Stock Exchange, Honda Motor Company's stock closed at 2,707 per share on Monday, June 4, 2016. Honda trades as an ADR on
On the Tokyo Stock Exchange, Honda Motor Company's stock closed at ¥2,707 per share on Monday, June 4, 2016. Honda trades as an ADR on the NYSE. One underlying Honda share equals one ADR. On June 4, 2016, the ¥/$ spot exchange rate was ¥307.57/$2.00.
a. At this exchange rate, what is the no-arbitrage U.S. dollar price of one ADR?
b. By comparison, Honda ADRs traded at $25.18. Do you think an arbitrage opportunity exists?
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International Financial Management
Authors: Cheol Eun
9th Edition
1260788865, 9781260788860
