Question

An American Depositary Receipt​ (ADR) is a security issued by a U.S. bank and traded on a U.S. stock exchange that represents a specific number of shares of a foreign stock. For​ example, Nokia Corporation trades as an ADR under the symbol NOK on the NYSE. Each ADR represents one share of Nokia Corporation​ stock, which trades under the symbol NOK1V on the Helsinki stock exchange.

If the U.S. ADR for Nokia is trading for $ 7.18 per​ share, and Nokia stock is trading on the Helsinki exchange for euro 5.43 per​ share, use the Law of One Price to determine the current ​$/euro exchange rate. ​(Round to three decimal​ places.)

Answer 1

Step-by-step explanation:

Nokia is trading in US at $ 7.18 per share and at € 6.08 on Helsinki stock exchange.

Law of one price - Price of Nokia must be the same in both the countries. So current exchange rate is $7.18/€6.08 = $1.18/€