Arbitrageurs Predict What Happens in Takeovers and Attempt to Earn

question 34

Multiple Choice

Arbitrageurs predict what happens in takeovers and attempt to earn profits by:

• A)Buying target firm shares after the tender offer announcement and selling the shares later for a higher premium.
• B)Selling acquiring firm shares before the tender offer announcement and buying the shares later at a lower price.
• C)Charging commissions for their advice to target and acquiring firms.
• D)None of the above.

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Definitions:

Common Shares

A type of equity ownership in a corporation, where holders have voting rights and potential dividends, but come after preferred shareholders in bankruptcy or liquidation.

FIFO

First-In, First-Out, an accounting method for valuing the cost of goods sold that assumes the first items placed in inventory are sold first.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced or acquired items are sold or used first.

Inflation

The velocity at which the aggregate cost of goods and services ascends, thereby reducing the efficacy of purchasing power.