Assume That Company a Makes a $40-Per-Share Offer for Company

question 10

Multiple Choice

Assume that Company A makes a $40-per-share offer for Company B, which now trades at $30 per share. Also assume that the deal is expected to close in 90 days. If the deal closes, then the risk arbitrager's return would be:

• A) 20%
• B) 30%
• C) 35%
• D) 50%

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Definitions:

Tennessee Court Of Appeals

An intermediate appellate court in Tennessee that reviews decisions from lower courts.

Lease

A contractual agreement where one party, the lessor, grants the other party, the lessee, the right to use an asset for a specified period in exchange for payment.

Illusory Promise

A statement that appears to be a promise but, upon closer examination, offers no commitment or assurance to act.

Option Contract

An agreement whereby the offeree gives the offeror a piece of consideration in exchange for the offeror’s agreement to hold the offer open for the specified period of time.