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Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 398 Weeks Ago, 2 Days Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Suppose that Boring Unreliable Gadget Inc. has two classes of shares with different voting rights. You find that class A and class B shares are trading at $49 and $37, respectively. However, historically, the spread has been $15, and you expect the price difference to reach that level.
a. Explain how you would set up a spread trade and how much profit you expect to make once the prices correct themselves.
b. Would the preceding strategy work if class A stock goes up to $75 per share?
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