Question

In a hostile takeover, _________________.
A) the acquirer often approaches the target’s management and shareholders directly with
a tender offer for the purchase of their shares
B) the acquirer often approaches the target’s management directly with a tender offer for
the purchase of their shares
C) the acquirer often bypasses the target’s management and approaches the target
company’s shareholders directly with a tender offer for the purchase of their shares
D) none of the above

The pound is pegged to silver at £2 per ounce and the dollar is pegged to silver at
$3.20 per ounce. The current market exchange rate is $1.80 per ₤. You have $320,
how would you take advantage of this situation?
A) Start with $320. Exchange the dollars for pounds at the current rate of $1.80 per ₤.
Buy silver with pounds at £2.00 per ounce. Convert the silver to dollars at $3.20 per
ounce.
B) Start with $320. Buy silver at $3.20 per ounce. Convert the silver to £ at £2.00 per
ounce. Exchange the £ for dollars at the current rate of $1.80 per ₤.
C) A and B both work.
D) None of the above.

Capital Asset Pricing Model assumes that:
A) Lending rate is smaller than borrowing rate
B) Lending rate is greater than borrowing rate
C) Lending rate is the same as borrowing rate
D) None of the above

A well diversified portfolio:
A) Has zero systematic risk
B) Has zero unsystematic risk
C) Systematic risk is smaller than unsystematic risk
D) None of the above

Answer 1

ANSWER

1.

C) the acquirer often bypasses the target’s management and approaches the target
company’s shareholders directly with a tender offer for the purchase of their shares

2.

B) Start with $320. Buy silver at $3.20 per ounce. Convert the silver to £ at £2.00 per
ounce. Exchange the £ for dollars at the current rate of $1.80 per ₤.

3.

C) Lending rate is the same as borrowing rate

4.

B) Has zero unsystematic risk

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