In the London market, Rolls-Royce stock closed at £0.875 per share. On the same day, the British Pound sterling to the U. S. dollar spot exchange rate was £0.6366/$1.00. Rolls Royce trades as an ADR in the OTC market in the United States. Five underlying Rolls-Royce shares are packaged into one ADR. If the Rolls Royce ADRs were trading at $5.75 when the underlying shares were trading in London at £0.875, ignoring transaction costs, the arbitrage trading profit would be A. $0.00. B. $1.12. C. $2.12. D. $3.12.
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