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  • Strategy A Strategy B 25 - 1500 - 4000: Answer 1

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    Sandip Agarwal
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    The document compares two investment strategies over different price levels from 25 to 55. Strategy A results in losses from 25 to 40 but gains from 45 to 55, while Strategy B consistently loses 4000. The optimal price for Strategy B is calculated to be 44.44 by setting up and solving an equation relating the strategies' profits. A scenario is described where buying stock at 110 GBP in London and immediately selling at 143 USD in New York would result in a $7 profit.

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    STRATEGY TO SOLUTION IS INSIDE

    Original Title

    Strategy A

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    The document compares two investment strategies over different price levels from 25 to 55. Strategy A results in losses from 25 to 40 but gains from 45 to 55, while Strategy B consistently loses 4000. The optimal price for Strategy B is calculated to be 44.44 by setting up and solving an equation relating the strategies' profits. A scenario is described where buying stock at 110 GBP in London and immediately selling at 143 USD in New York would result in a $7 profit.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    15 views1 page

    Strategy A Strategy B 25 - 1500 - 4000: Answer 1

    Uploaded by

    Sandip Agarwal
    The document compares two investment strategies over different price levels from 25 to 55. Strategy A results in losses from 25 to 40 but gains from 45 to 55, while Strategy B consistently loses 4000. The optimal price for Strategy B is calculated to be 44.44 by setting up and solving an equation relating the strategies' profits. A scenario is described where buying stock at 110 GBP in London and immediately selling at 143 USD in New York would result in a $7 profit.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Answer 1:

    strategy A strategy B

    25 -1500 -4000

    30 -1000 -4000

    35 -500 -4000

    40 0 -4000

    45 500 1000

    50 1000 6000

    55 1500 11000

    2. let x be the price

    100*(x- 40) = 1000(x-40) - 4000

    900x = 40,000

    x = 44.44

    Answer 2:

    Price in New york should be 1.3*110 = 143

    so buy the stock in LSE at 110 GBP, or 143 USD and immediately sell at NYSE for 150 USD

    profit = 7 US

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