Question 3 Firms X and Y are identical in all respects except for capital structure. These firms operate in a tax-exempt haven when firms and individuals pay no taxes at all. Current data on the financial structure of the two firms is as follows Firm X 1,000 shares outstanding, current market price of $10 per share 100 bonds outstanding with a current bond price of $100 per bond Firm Y 2,000 shares outstanding, current market price of $8 per share 50 bonds outstanding with a current bond price of $100 per bond The bonds in both firms are risk free and they are zero-coupon bonds that will pay the holder principal and interest one year from today. The risk-free interest rate is 10%, Art individual investor can also borrow or lend from a bank at the 10% risk-free rate a) Construct an arbitrage portfolio that includes exactly 50 shares of stock in firm X. How large are the arbitrage profits from this portfolio? Question 3 Firms X and Y are identical in all respects except for capital structure. These firms operate in a tax-exempt haven when firms and individuals pay no taxes at all. Current data on the financial structure of the two firms is as follows Firm X 1,000 shares outstanding, current market price of $10 per share 100 bonds outstanding with a current bond price of $100 per bond Firm Y 2,000 shares outstanding, current market price of $8 per share 50 bonds outstanding with a current bond price of $100 per bond The bonds in both firms are risk free and they are zero-coupon bonds that will pay the holder principal and interest one year from today. The risk-free interest rate is 10%, Art individual investor can also borrow or lend from a bank at the 10% risk-free rate a) Construct an arbitrage portfolio that includes exactly 50 shares of stock in firm X. How large are the arbitrage profits from this portfolio