If the Firms in a Merger or Acquisition Rely on Similar

question 23

True/False

If the firms in a merger or acquisition rely on similar skills to conduct the critical activities of the firms, then it is conglomerate diversification.

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Definitions:

Risk-Adjusted Basis

A method of calculating returns or performance that accounts for the level of risk associated with an investment.

Market Proxy

A stock market index or a similar benchmark used to represent the overall movement of the market.

Mean/Variance Efficient

Describes a portfolio that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

CAPM

Stands for Capital Asset Pricing Model, a formula used to determine the expected return on an investment based on its risk relative to the market.