In the London market, Rolls Royce stock closed at £0.875 per share on Thursday, April 17, 2003. Rolls Royce trades as an ADR in the OTC in the United States. Five underlying Rolls Royce shares are packaged into one ADR. On April, 17, 2003, the British Pound sterling to the U.S. spot exchange rate was £0.6366/$1.00.
-Assume Nestle is trading for SF200 in Zurich and Nestle ADRs (4 ADRs per share)are trading for $40 on the New York Stock exchange.There is no arbitrage possible.What is the current SF/US$ exchange rate?
A) SF 0.8/$
B) SF 1/$
C) SF 1.25/$
D) SF 4/$

Question

Quizplus · Accepted Answer

Each ADR is worth SF 50 (SF 200/4)SF 50/$40 = SF1.25/$ = $0.80/SF

In the London Market, Rolls Royce Stock Closed at £0