When Two Firms Merge and There Is No Synergy Gain

question 12

Multiple Choice

When two firms merge and there is no synergy gain but the only change is a reduction in risk:

• A) there is no effect on the bondholders or stockholders.
• B) both the bondholders and stockholders are made better off.
• C) the bondholders gain in value while the stockholders lose value.
• D) the stockholders gain in value while the bondholders lose value.

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Definitions:

Malfunctioned

Refers to something that has failed to function properly or as expected.

Negligence

The failure to take reasonable care to avoid causing injury or loss to another person, resulting in legal liability.

Interest Act

Legislation that stipulates regulations regarding the calculation and payment of interest on various types of loans and debts.

Criminal Code

is a document that compiles all criminal laws and procedures in a particular jurisdiction.