ETF - three shares of GE. Total profit for such transaction...

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a. We can value the portfolio by summing the value of the securities in it: Price per share of ETF = 2 × $28 + 1 × $40 + 3 × $14 = $138 b. If the ETF currently trades for $120, an arbitrage opportunity is available. To take advantage of it, one should buy ETF for $120, sell two shares of HPQ, sell one share of SHLD, and sell
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Unformatted text preview: three shares of GE. Total profit for such transaction is $18. c. If the ETF trades for $150, an arbitrage opportunity is also available. It can be realized by buying two shares of HPQ, one share of SHLD, and three shares of GE, and selling one share of the ETF for $150. Total profit would be $12....
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