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 that Nestle shares are trading at SF 300 in Zurich and $51 in New York.Each share equals 4 ADRs.The current exchange rate is SF1.5/$.In the absence of transaction costs,can you make an arbitrage profit?

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The Answer of 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 that Nestle shares are trading at SF 300 in Zurich and $51 in New York.Each share equals 4 ADRs.The current exchange rate is SF1.5/$.In the absence of transaction costs,can you make an arbitrage profit?

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