Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 28, Problem 2P
Summary Introduction
To explain: The reasons why mergers cluster in time, causing merger waves.
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1. Bond X is worth $91 today. The bond will mature in one year and pay $100 or $84 with probabilities 0.75 and 0.25, respectively. Assuming the bond pays no cash flows during the year, which of the following is closest to the expected return on the bond?
5%
0%
0%
5%
0%
2. At the beginning of the year, a mutual fund has a NAV of $20. At the end of the year, the NAV is $21 and the fund has received no dividends or other distributions throughout the year. The return on the fund’s benchmark over the same period of time was 10%. Suppose the fund incurred expenses of $2 per fund share during the year.
What was the return on the fund’s underlying portfolio before any expenses that affected NAV? Did this before-expense return beat the fund’s benchmark?
15%; Yes, the fund’s underlying portfolio beat its benchmark
15%; No, the fund’s underlying portfolio beat its benchmark
0%; No, the fund’s underlying portfolio beat its benchmark
20%; Yes, the fund’s underlying portfolio beat its benchmark…
1. Which of the following assets is most likely to trade over the counter but still have high liquidity?
a. A short-term Treasury bond
b. A long-term corporate bond
c. A short-term corporate bond
d. A large-cap stock
e. A small-cap stock
2. Assume you purchased 600 shares of XYZ common stock on margin at $35 per share from your broker. If the initial margin is 60%, the amount you borrowed from the broker is closest to _________.
a. $8,500
b. $21,000
c. $29,500
d. $12,500
e. $16,000
3. You invest $1,550 in security A with a beta of 1.4 and $1,350 in security B with a beta of 0.4. The beta of this portfolio is closest to _____________ .
a. 0.95
b. 0.90
c. 1.35
d. 1.05
e. 1.15
4.
Which of the following orders is most likely to increase the difference between the highest bid price and the lowest ask price?
a. A large market order
b. A large limit order
c. A small limit order
d. A small market order
e. There will be no major difference between these
5.
Bond X is worth $91 today.…
Chapter 28 Solutions
Corporate Finance
Ch. 28.1 - Prob. 1CCCh. 28.1 - Prob. 2CCCh. 28.2 - On average, what happens to the target share price...Ch. 28.2 - Prob. 2CCCh. 28.3 - What are the reasons most often cited for a...Ch. 28.3 - Prob. 2CCCh. 28.4 - Prob. 1CCCh. 28.4 - What do risk arbitrageurs do?Ch. 28.5 - Prob. 1CCCh. 28.5 - Prob. 2CC
Ch. 28.6 - Prob. 1CCCh. 28.6 - Prob. 2CCCh. 28 - What are the two primary mechanisms under which...Ch. 28 - Prob. 2PCh. 28 - What are some reasons why a horizontal merger...Ch. 28 - Prob. 4PCh. 28 - Prob. 5PCh. 28 - Prob. 6PCh. 28 - How do the carryforward and carryback provisions...Ch. 28 - Diversification is good for shareholders. So why...Ch. 28 - Your company has earnings per share of 4. It has 1...Ch. 28 - If companies in the same industry as TargetCo...Ch. 28 - Prob. 11PCh. 28 - Prob. 12PCh. 28 - Prob. 13PCh. 28 - Lets reconsider part (b) of Problem 99. The actual...Ch. 28 - ABC has 1 million shares outstanding, each of...Ch. 28 - Prob. 16PCh. 28 - How does a toehold help overcome the free rider...Ch. 28 - Prob. 18P
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