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Title: A McDonald's Big Mac value meal consists of a Big Mac Sandwich, Large Coke, and a Large Fry. ... Post by: Memphic on Nov 19, 2017 A McDonald's Big Mac value meal consists of a Big Mac Sandwich, Large Coke, and a Large Fry. Assume that there is a competitive market for McDonald's food items and that McDonald's sells the Big Mac value meal for $4.79. Does an arbitrage opportunity exists and if so how would you exploit it and how much would you make on one extra value meal?
A) Yes, buy extra value meal and then sell Big Mac, Coke, and Fries to make arbitrage profit of $0.68. B) No, no arbitrage opportunity exists. C) Yes, buy Big Mac, Coke, and Fries then sell value meal to make arbitrage profit of $1.09. D) Yes, buy Big Mac, Coke, and Fries then sell value meal to make arbitrage profit of $0.68. Title: Re: A McDonald's Big Mac value meal consists of a Big Mac Sandwich, Large Coke, and a Large Fry. ... Post by: anicid on Nov 19, 2017 A
Explanation: A) Buy value meal and sell Big Mac, Coke and Fries -4.79 + 2.99 + 1.39 + 1.09 = 0.68 (so arbitrage exists) |