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

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Quizplus · Accepted Answer

The difference in closing prices between Frankfurt and New York can be explained by the fact that the New York market closes several hours after the Frankfurt exchange, and thus market prices or exchange rates had changed slightly. This means that there was a small window of time where arbitrage trading could have occurred, but by the time the New York market closed, the opportunity had passed. Therefore, option C is the best choice.

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