The following table gives cost data of select stock prices on 3rd Dec 2003 in two markets, BSE of India and NQE of Kya Kya island. Closing stock refers to the price at the close of trading hours and opening stock to the price at the beginning of the day. The currency of Kya Kya is # and the exchange rate is # = Rs 11.
Arbitrage means buying in one market and selling simultaneously in another market. If Mr. Ghosh Babu were to buy a share at the opening price on one exchange and be able to sell it at the opening price on the other exchange, on which share does he make maximum % profit?
First we convert the currency of Kya Kya into Rs. by multiplying the values to 11 and we can get the following table:
In SIFY, profit made by him=Â $$\ \frac{\ 232-231}{231}\cdot100\%=0.43\%$$
In INFY, profit made=Â $$\ \frac{\ 105-104.5}{104.5}\cdot100\%=0.47\%$$
In WIPRO, profit made=Â $$\ \frac{\ 60.5-60}{60}\cdot100\%=0.83\%$$
In TCS, Profit made=Â $$\ \frac{\ 450-445.5}{445.5}\cdot100\%=1.01\%$$
Therefore, max profit is made in TCS share
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