You are a U.S. investor and wish to buy 10,000 shares of Club Méditerranée ("Club Med"). You can buy them on the Paris Bourse or on SEAQ International in London. You ask the brokers to quote you net prices (no commissions paid). There are no taxes on foreign shares listed in London. Here are the quotes:
London (in £) $56\quad3 / 4 - 57\quad1 / 4$
Paris (in €) $78\quad1 / 2 - 78\quad3 / 4$
$/£ (dollars per pound) 1.5000-1.5040
€/$ (euros per dollar) 0.91100-0.91200
a. What is your total dollar cost if you buy the Club Med shares at the cheaper place?
b. Are there arbitrage opportunities between London and Paris?

Question

You are a U.S. investor and wish to buy 10,000 shares of Club Méditerranée ("Club Med"). You can buy them on the Paris Bourse or on SEAQ International in London. You ask the brokers to quote you net prices (no commissions paid). There are no taxes on foreign shares listed in London. Here are the quotes:
London (in £) $56\quad3 / 4 - 57\quad1 / 4$
 Paris (in €) $78\quad1 / 2 - 78\quad3 / 4$
 $/£ (dollars per pound) 1.5000-1.5040
€/$ (euros per dollar) 0.91100-0.91200
a. What is your total dollar cost if you buy the Club Med shares at the cheaper place?
b. Are there arbitrage opportunities between London and Paris?

Quizplus · Accepted Answer

The Answer of You are a U.S. investor and wish to buy 10,000 shares of Club Méditerranée ("Club Med"). You can buy them on the Paris Bourse or on SEAQ International in London. You ask the brokers to quote you net prices (no commissions paid). There are no taxes on foreign shares listed in London. Here are the quotes:
London (in £) $56\quad3 / 4 - 57\quad1 / 4$
 Paris (in €) $78\quad1 / 2 - 78\quad3 / 4$
 $/£ (dollars per pound) 1.5000-1.5040
€/$ (euros per dollar) 0.91100-0.91200
a. What is your total dollar cost if you buy the Club Med shares at the cheaper place?
b. Are there arbitrage opportunities between London and Paris?

You Are a U 563/4−571/456\quad3 / 4 - 57\quad1 / 4563/4−571/4

You Are a U $56\quad3 / 4 - 57\quad1 / 4$