Use the Information for the Question(s) Below

question 72

Multiple Choice

Use the information for the question(s) below.
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 two shares of International Business Machines (IBM) , three shares of Merck (MRK) , and three shares of Citigroup Inc. (C) . Suppose the current market price of each individual stock are shown below:

-Suppose that the ETF is trading for $424.50; you should

• A) sell the ETF and buy 2 shares of IBM, 3 shares of MRK, and 3 shares of C.
• B) sell the ETF and buy 3 shares of IBM, 2 shares of MRK, and 3 shares of C.
• C) buy the ETF and sell 2 shares of IBM, 3 shares of MRK, and 3 shares of C.
• D) do nothing, no arbitrage opportunity exists.

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Definitions:

Product Costs

Expenses directly tied to the production of goods or services, including labor, materials, and overhead costs.

Statement of Cost

A detailed report outlining the total costs associated with the production or procurement of goods and services, including materials, labor, and overhead.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, indicating its net income or loss.

Manufacturing Company

A type of business that produces finished goods from raw materials through the use of labor, machinery, tools, and chemical or biological processing or formulation.