Use the Table for the Question(s)below

question 23

Multiple Choice

Use the table for the question(s) below.
Consider the following prices from a McDonald's Restaurant:

-A McDonald's Big Mac value meal consists of a Big Mac, a large Coke and a large fries. Assume that there is a competitive market for McDonald's food items and that McDonald's sells the Big Mac value meal for $4.79. Does an arbitrage opportunity exists and, if so, how would you exploit it and how much would you make on one value meal?

• A)No, no arbitrage opportunity exists.
• B)Yes, buy a value meal and then sell the Big Mac, Coke and fries to make arbitrage profit of $0.38.
• C)Yes, buy a Big Mac, Coke and fries, then sell a value meal to make arbitrage profit of $1.09.
• D)Yes, buy a Big Mac, Coke and fries, then sell a value meal to make arbitrage profit of $0.68.

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Definitions:

Liability Account

An accounting record of amounts owed by a business to creditors, typically categorized as current or long-term liabilities.

Bank Service Charge

Fees charged by banks for handling specific types of transactions, account maintenance, or services rendered.

Note Receivable

A written promise that requires one party to pay a specified sum of money to another party on a set date or on demand.

Depositor's Account

A financial account held at a bank or financial institution, into which a depositor can deposit and withdraw money.