The Board of Directors of a Firm Approves an Exchange

question 19

Multiple Choice

The board of directors of a firm approves an exchange offer in which their shareholders are offered stock in one of the firm's subsidiaries in exchange for their holdings of parent company stock. This offer is best described as a

• A) Split-up
• B) Split-off
• C) Equity carve-out
• D) Spin-off
• E) Tender offer

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Definitions:

Excess Reserves

The surplus funds that banks hold over the required minimum set by the central bank to meet unexpected withdrawals.

Deposits

Funds stored in a bank or similar entity for security purposes that have the potential to accrue interest as time passes.

Reserve Requirement

The minimum amount of funds that a bank must hold in reserve against deposit liabilities, set by the central bank.

Excess Reserves

The reserves held by banks over and above the legal or required reserve ratio set by central banking authorities.