Problem:
Consider the following prices from a McDonalds Restaurant:
Big mac sandwich $2.99
Large coke $1.39
Large Fry $1.09
A McDonalds Big Mac value meal consists of a Big Mac sandwich, large Coke, and a large fry. Assuming that there is a competitive market for McDonalds food items, at what price must a Big Mac value meal sell to insure the absence of an arbitrage opportunity and uphold the law of one price
1. $4.08
2. $4.38
3. $5.47
4. $5.77