Question
Using fllowing Explain if there is an arbitrrage opportunity,if yes how would you exploit it. Demisa announced last week that it will go public via
Using fllowing Explain if there is an arbitrrage opportunity,if yes how would you exploit it.
Demisa announced last week that it will go public via a SPAC (through a merger with lwes Acquisition Corp), in a deal that currently values demisa at $9 billion. You have an opportunity to buy securities A, B, and F today, on April 01, 2021 (from a reputable investment bank, which will pay up). The per share payoffs of these are as follows: One share of security A will pay you $61 in one year, if demisa is public by April 01, 2022 and valued at $9 billion or higher on April 01, 2022 (and its pays nothing otherwise). One share of security B will pay you $305 in one year, if demisa is public by April 01, 2022 and valued at strictly less than $9 billion on April 01, 2022 (and it pays nothing otherwise). One share of security F will pay you $610 on April 01, 2022, if -- and only if --demisa does not go public by April 01, 2022. The (per share) prices of these securities are: $20 for security A, $100 for security B, and $200 for security F. The risk-free rate is 1%.
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