The Primary Purpose of a Flip-Over Provision Is To

question 104

Multiple Choice

The primary purpose of a flip-over provision is to:

• A) Increase the number of shares outstanding while also increasing the value per share.
• B) Dilute a corporate raider's ownership position thereby increasing the cost of a takeover.
• C) Reduce the market value of each share of stock.
• D) Give the existing corporate directors the sole right to remove a poison pill.
• E) Provide additional compensation to any senior managers who lose their jobs as a result of a corporate takeover.

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Definitions:

Nominal Interest

The stated interest rate of a bond or loan, not accounting for inflation or the compounding of interest.

Compounded Quarterly

Interest calculation where the interest earned over a quarter is added to the principal for the calculation of future interest, effectively compounding every three months.

Effective Rate

The actual interest rate of an investment or loan, taking into account the compounding of interest.

Effective Rate

The real rate of interest earned or paid on an investment or loan in a specified period, considering compounding.