Use the Information for the Question(s)below

question 60

Essay

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:
-Assume that the ETF is trading for $366.00,what (if any)arbitrage opportunity exists? What (if any)trades would you make?

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Definitions:

Redeemed

Refers to the act of repaying or buying back something, such as a financial security or a reputation.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when entrusted with care of money, property, or confidential information.

Corporate Decisions

Corporate decisions are choices or judgments made by the leadership of a corporation that affect the direction, strategy, operations, or governance of the organization.

Preemptive Rights

Rights that allow shareholders to purchase additional shares in a company before the company offers them to the public, protecting their ownership percentage from dilution.