Jen Owns 30 Shares of Stock in Delta Fashions and Wants

question 30

Multiple Choice

Jen owns 30 shares of stock in Delta Fashions and wants to win a seat on the board of directors. The firm has a total of 100 shares of stock outstanding. Each share receives one vote. Presently, the company is voting to elect three new directors. Which one of the following statements must be true given this information?

• A) Regardless of the voting procedure, Jen does not own enough shares to gain a seat on the board.
• B) If straight voting applies, Jen is assured a seat on the board.
• C) If straight voting applies, Jen can control all of the open seats.
• D) If cumulative voting applies, Jen is assured one seat on the board.
• E) If cumulative voting applies, Jen can control all of the open seats.

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Definitions:

Arbitrage

The simultaneous purchase and sale of an asset in different markets to exploit price differences for a risk-free profit.

Mispricing

The occurrence of an asset being priced either higher or lower than its intrinsic value due to market inefficiencies or errors in analysis.

Riskless Profits

Profits made from trading or investing that are deemed to have no risk; often considered unrealistic in practical financial markets.

Capital Asset Pricing Model

A model that describes the relationship between systematic risk and expected return for assets, particularly stocks.