What is the price per share of the ETF in a normal market? Assume that the ETF is trading for $3,700.00. What (if any) arbitrage opportunity exists? What (if any) trades would you make?
What is the price per share of the ETF in a normal market? Assume that the ETF is trading for $3,700.00. What (if any) arbitrage opportunity exists? What (if any) trades would you make?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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An exchange-traded fund (ETF) is a security that represents a portfolio of individual stocks. Consider an ETF for which each share represents a portfolio of three shares of International Business Machines (IBM), five shares of Apple (AAPL), and eight shares of Tesla (TSLA).
Suppose the current market price of each individual stock is shown below:
| Stock | Current Price |
| IBM | $145.60 |
| Apple | $180.00 |
| Tesla | $267.50 |
- What is the price per share of the ETF in a normal market?
- Assume that the ETF is trading for $3,700.00. What (if any) arbitrage opportunity exists? What (if any) trades would you make?
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