One Honda share = one ADR, so yen price (27.02)dividedbythe¥/ exchange rate gives US price = ¥2,907 / ¥107.57/$1 ≈ $27.02 per ADR.
No-Arbitrage U.S. Dollar Price of One Honda ADR
Given the information provided, we can calculate the no-arbitrage U.S. dollar price of one Honda ADR as follows:
Exchange Rate: The yen-to-dollar exchange rate on June 6, 2016, was ¥107.57/$1.00. This means it takes ¥107.57 to buy $1.00.
Honda Share Price: The Honda Motor Company stock price on the Tokyo Stock Exchange on June 6, 2016, was ¥2,907 per share.
ADR Ratio: One underlying Honda share equals one ADR.
Therefore, to find the no-arbitrage U.S. dollar price of one ADR, we simply need to divide the Honda share price in yen by the exchange rate:
U.S. Dollar Price per ADR = ¥2,907 / ¥107.57/$1.00
U.S. Dollar Price per ADR ≈ $27.02
Therefore, the no-arbitrage U.S. dollar price of one Honda ADR on June 6, 2016, was approximately $27.02.
Note: This calculation assumes no transaction costs or fees associated with buying or selling Honda shares or ADRs. In reality, there may be small fees that would slightly affect the no-arbitrage price.