Describing arbitrage opportunity

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On the Milan boards, Fiat stock closed at EUR5.84 per share on Thursday, March 3, 2005. Fiat trades as an ADR on the NYSE. One underlying Fiat share equals one ADR. On March 3, the S/EUR spot exchange rate was $1.3112/EUR1.00. If Fiat ADR's were trading at $7 when the underlying shares were trading in Milan at EUR5.84, what could you do to earn a trading profit? Assume transaction costs are negligible.

Reference no: EM1333365

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Describing arbitrage opportunity : On the Milan boards, Fiat stock closed at EUR5.84 per share on Thursday, March 3, 2005. Fiat trades as an ADR on the NYSE. One underlying Fiat share equals one ADR.

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