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In: Finance

Q1. OO company decided to expand its production and in order to do so it will...

Q1. OO company decided to expand its production and in order to do so it will issue new equity. The days before actual public announcement, the stock price decreases on an unusual high number of large sell orders. This is an example of

a. Weak market efficiency.

b. Semi-strong market efficiency.

c. Strong market efficiency.

d. Very strong market efficiency.

e.None of the above, this is normal market behavior.

Q2. Angel investors (“Sharks”) and Venture Capital investors are examples of a so-called tax preference clientele.

a.True

b.False

=> T? F? I know that angel investors invest for capital gain but I heard that angels get tax deduction. Then isn't not tax but high risk-high return is the reason why angels do invest?

Would u Please choose the answer and explain why?

Expert Solution

a. Very Strong Market efficiency.

This is very strong-form version of the efficient market hypothesis states that stock prices reflect all information relevant to the firm, even including information available only to company insiders. This version of the hypothesis is quite extreme.

b. True.

Angel Investor is an individual who invests their own money in an entrepreneurial company.

Angels are more likely to be persuaded by an entrepreneur’s persistence. They are typically willing to accept risk and demand less or no control in return for a part of a company that might grow to be valuable someday and getting tax benefits. They are not millionaires. They typically earn between 60k – 100k USD per year.

Angels could be professionals such as doctors, lawyers; business associates such as customers, suppliers and executives; and even other entrepreneurs.

It is like retirement plan 401(k) plan contributions also reduce the amount of your income tax withholding. Mutual Funds investments that helps individuals who can’t afford to buy lot of asset classes and cannot diversify risk. But because of stock market fraud of Great Recession the alternative is Angel Investing.

Since, Entrepreneurship plays an influential role in theeconomic growth and standard of living of the country. Countries are also promoting Angel investing and Tax Deduction Schemes.

jeff jeffy answered 2 years ago

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