Use the Following Information to Answer the Question(s) Below

question 76

Multiple Choice

Use the following information to answer 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 Apple Inc. (APPL) , one share of Google (GOOG) , and ten shares of Microsoft (MSFT) . Suppose the current stock prices of each individual stock are as shown below:

-Pfizer Inc. (PFE) stock is currently trading on the NYSE with a quoted bid of $18.35 and an ask price of $18.40. At the same time NASDAQ dealers are posting for following bid and ask prices for PHE: Which of these NASDAQ represents an arbitrage opportunity when compared to the NYSE quotes?

• A) Only NASDAQ dealer #1
• B) Only NASDAQ dealer #2
• C) Only NASDAQ dealer #3
• D) Both NASDAQ dealer #1 and dealer #3
• E) None of the above

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Definitions:

Balance Sheet

A financial statement that provides a snapshot of a company's financial position, including assets, liabilities, and shareholders' equity at a specific point in time.

Gross Profit Method

An inventory estimation technique that uses the historical gross profit margin to estimate the cost of goods sold and ending inventory.

Physically Counting

The manual process of counting inventory items one by one to verify the quantity on hand.

Current Assets

Assets that are expected to be converted into cash within one year or one business cycle.