Suppose that at this moment, the common stock of ABC Ltd. is trading at Toronto Stock Exchange and the Tokyo Stock
Exchange as follows (Trading Price is on per share basis)
TSX | Bid:C$12 Ask: C$12.05 TSE | Bid: 1,150 Yen Ask: 1,190 Yen
The exchange rate at this moment is C$0.1=Yen 1.0
a) Is there arbitrage opportunity? If so what is it?
b) Assume no brokerage commission, find arbitrage profit of simultaneously buying and selling 1.0 million share
c) If brokerage commision is 0.5% of the trading price at both locations, does the arbitrage opportunity still exist?
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