A.5. Suppose Hewlett-Packard (HPQ) stock is currently trading on the NYSE with a bid price of $28.12 and an ask price of $28.24. At the same time, a NASDAQ dealer posts a bid price for HPQ of $27.98 and an ask price of $28.10. a. Is there an arbitrage opportunity in this case? If so, how would you exploit it? b. Suppose the NASDAQ dealer revises his quotes to a bid price of $28.10 and an ask price of $28.22. Is there an arbitrage opportunity now? If so, how would you exploit it? CS cWhan muebe ne of the highest bid price and the lowest ask price for no arbitrage oppor- tunity to exist?
A.5. Suppose Hewlett-Packard (HPQ) stock is currently trading on the NYSE with a bid price of $28.12 and an ask price of $28.24. At the same time, a NASDAQ dealer posts a bid price for HPQ of $27.98 and an ask price of $28.10. a. Is there an arbitrage opportunity in this case? If so, how would you exploit it? b. Suppose the NASDAQ dealer revises his quotes to a bid price of $28.10 and an ask price of $28.22. Is there an arbitrage opportunity now? If so, how would you exploit it? CS cWhan muebe ne of the highest bid price and the lowest ask price for no arbitrage oppor- tunity to exist?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A.5. Suppose Hewlett-Packard (HPQ) stock is currently trading on the NYSE with a bid price of
$28.12 and an ask price of $28.24. At the same time, a NASDAQ dealer posts a bid price for
HPQ of $27.98 and an ask price of $28.10.
a. Is there an arbitrage opportunity in this case? If so, how would you exploit it?
b. Suppose the NASDAQ dealer revises his quotes to a bid price of $28.10 and an ask price of
$28.22. Is there an arbitrage opportunity now? If so, how would you exploit it?
CS cWhan muebe ne of the highest bid price and the lowest ask price for no arbitrage oppor-
tunity to exist?
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