Question

5. You notice that the share price of Gazprom (a Russian natural gas company) is selling...

5. You notice that the share price of Gazprom (a Russian natural gas company) is selling for the Russian currency equivalent of $11 a share in the Russian market and the ADR for Gazprom is selling for $12 in the US market. How do you make a profit? This is just another form of arbitrage (buy low, sell high, make a profit). Be specific r.e. the stages involved in the trade.
Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Price of the ADR= $12
Price in the Russian share market (in US equivalent terms) = $11.

Hence, one should buy at a cheaper price in Russian share market, convert it to USD, this will incur him the cost of $11 (+ some additionally transaction / conversion charges or taxes etc).

He can now sell these shares in the US at $12 to earn his profits. As he sells his shares here, the prices of ADR's will reduce in US. Hence, please note that the volume of the ADR's in the US market should also be large enough to allow him to carry out the transaction without affecting the $12 price in the market. Otherwise, he may make lesser profits/ even losses.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Your company offered you an expatriate position and gave you two options to choose from....
1. Your company offered you an expatriate position and gave you two options to choose from. You may either move to Austria or Australia. You will receive the same salary regardless of which country you choose. A friend mentions to you that the OECD Statistics portal includes data on “comparative price levels.” Find the latest data for Australia and Austria and discuss how your purchasing power in one country will compare to the other. Which country is more advantageous? How...
As the CFO of Dragon Airways (ticker symbol: DRAG) you decide to sell 100,000 shares in...
As the CFO of Dragon Airways (ticker symbol: DRAG) you decide to sell 100,000 shares in a       secondary offering to raise additional capital for expansion. Your shares currently trade at $100/share and have a beta of 1.25. It will take several weeks to complete the registration process through the SEC and you are concerned that the overall stock market will fall in the interim. So you decide to hedge the stock sale by selling short the shares of another...
Pick 4 questions to answer that you feel confident that you picked the correct answer Regarding...
Pick 4 questions to answer that you feel confident that you picked the correct answer Regarding setting the budget for integrated marketing communications options: - all-you-can-afford approaches involve setting objectives and then specifying tasks needed to achieve them. - incremental technique tries to set budgets based on other firms’ decisions. - competitive budgeting establishes the same budget year after year. - percentage-of-sales methods tend to ignore the promotion-causes-sales relationship. Many advertisements work primarily through recognition which means - that the...
Describe and assess the different risks associated to each alternative of the decision making and select...
Describe and assess the different risks associated to each alternative of the decision making and select your risk preference or tendency to choose a risky or less risky option. (300 words minimum) The directors of fast food chain of restaurants based in Barcelona named El Mejicano were considering whether to begin the promotion for their new line of menus than originally planned. "I think we should go ahead with the price cuts," Pedro Morales said. "After all, it couldn't hurt!...
Please read the article and answear about questions. Determining the Value of the Business After you...
Please read the article and answear about questions. Determining the Value of the Business After you have completed a thorough and exacting investigation, you need to analyze all the infor- mation you have gathered. This is the time to consult with your business, financial, and legal advis- ers to arrive at an estimate of the value of the business. Outside advisers are impartial and are more likely to see the bad things about the business than are you. You should...
Case Study: Monica’s Handbags Monica, after completing an internship with a national apparel company, decided that...
Case Study: Monica’s Handbags Monica, after completing an internship with a national apparel company, decided that she wanted to exercise her creative design talents and her strong entrepreneurial spirit by starting her own fashion business. She conducted fundamental market research and determined that there is an unfulfilled market need for the moderate fashion handbags that she had designed at the $100 retail price point. She also learned that the independent women’s apparel stores she was targeting require a 50% retail...
How this case apply to globalization ? FREEPORT, Pa. The rising dollar is putting US. Manufacturers...
How this case apply to globalization ? FREEPORT, Pa. The rising dollar is putting US. Manufacturers through the equivalent of a new year's fitness regime, causing pain for now but also promising long-term gains in efficiency. After more than a decade of weakness, the dollar began surging in mid-2014 against the euro and many other currencies. That is making U.S.-made products pricier in other countries and imports cheaper in the U.S.-a combination that is likely to expand, the already gaping...
CASE #1: COCA COLA The Coca-Cola company started 110 years ago as a small, insignificant one...
CASE #1: COCA COLA The Coca-Cola company started 110 years ago as a small, insignificant one man business. Since then, it has grown into one of the largest companies in the world. The first chairman of the company was Dr. John Pemberton and the current chairman is Muhtar Kent. The demand for this product has made this company into a 50 billion dollar business. Coca-Cola was invented by Dr. John Pemberton, an Atlanta pharmacist. He concocted the formula in a...
Read and comment: $2500: “A Fair Price for Hamilton” NY Times, 23 October 2016 Gregory Mankiw...
Read and comment: $2500: “A Fair Price for Hamilton” NY Times, 23 October 2016 Gregory Mankiw Consumers of goods and services do not typically wish that producers charged higher prices. But that was exactly my desire on a recent trip to New York City. The story begins with a basic mismatch: I am a big fan of theater, and I live just outside Boston. While Boston is a good city for the arts, it is not the mecca that New...
Answer 4 questions you feel confidently about Elizabeth has developed a promotional campaign for a client...
Answer 4 questions you feel confidently about Elizabeth has developed a promotional campaign for a client that promises a hefty return for her owned cash-strapped business. While the campaign does not violate any laws, it might be considered manipulative and misleading, especially when targeted toward senior citizens. If Elizabeth were to consult the AMA Code of Ethics she’d discover: - there is a high value placed on creative approaches for clients which can outweigh other concerns if the client or...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT