Page 2 - Test
P. 2
2.
(a) ETF price per share = PHPQ * 2 + PSHLD * 1 + PGE * 3
= 28 * 2 + 40 * 1 + 14 * 3
ETF price per share = $138 in normal competitive market
(b) Will borrow multiple (n) of $138 from bank to buy
multiple (n) ETF shares at $120 per share.
Today Future
Borrow from a Bank $138 * n -X
Invest in ETF -$120 * n +X
Net Cashflow $18 * n 0
(c) Will sell multiple (n) ETF shares at $150 per share
to invest at bank with multiple (n) of $138.
Today Future
Sell ETF $150 * n -X
Invest at Bank -$138 * n +X
Net Cashflow $12 * n 0
