Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Walgreen Company (NYSE: WAG) is currently trading at $48.75 on the NYSE.  Walgreen Company is also listed on NASDAQ and assume it is currently trading on NASDAQ at $48.50.  Does an arbitrage opportunity exists and if so how would you exploit it and how much would you make on a block trade of 100 shares?

  1. A) No, no arbitrage opportunity exists.
  2. B) Yes, buy on NASDAQ and sell on NYSE, make $25.
  3. C) Yes, buy on NYSE and sell on NASDAQ, make $25.
  4. D) Yes, buy on NASDAQ and sell on NYSE, make $250.

 

Expert Solution
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Arbitrage is the simultaneous buying and selling of securities at different markets, at different price so as to profit from the different price of the asset in different markets.

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