Stock in Daimler AG,the famous German automobile manufacturer trades on both the Frankfurt Stock Exchange in Germany and on the New York Stock Exchange.On the Frankfurt bourse,Daimler closed at a price of €54.34 on Wednesday,March 5,2008.On the same day,Daimler closed in New York at $83.55 per share.To prevent arbitrage trading between the two exchanges,the shares should trade at the same price when adjusted for the exchange rate.The $/€ exchange rate on March 5 was $1.5203/€1.00.Thus,€54.34 * $1.5203/€ = $82.61,while the closing price in New York was $83.55.The difference is easily explainable by the fact that

Question

Quizplus · Accepted Answer

The price difference is likely due to slight changes in market prices or exchange rates between the time when the Frankfurt exchange closed and when the New York exchange closed. Therefore, option C is the most likely explanation. Options A and B are less plausible explanations, as transaction costs and opening prices are unlikely to play a significant role in this scenario. Option D is not a valid answer, as one of the other three options must be true.

Stock in Daimler AG,the Famous German Automobile Manufacturer Trades on Both