Which of the Following Statements Best Describes the Average Stock

question 14

Multiple Choice

Which of the following statements best describes the average stock price reactions to mergers?

• A)Both the target's and the acquirer's share prices increase slightly.
• B)Both the target's and the acquirer's share prices increase substantially.
• C)The target's share price increases substantially,while the acquirer's share price falls substantially.
• D)The target's share price increases substantially,while the acquirer's share price increases only slightly.
• E)The target's share price falls slightly,while the acquirer's share price increases substantially.

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Definitions:

Exercise Price

In options trading, it is the price at which the holder can buy (call option) or sell (put option) the underlying security.

Black-Scholes Model

A mathematical model used to price European-style options, evaluating their worth based on stock volatility, risk-free rate, and other factors.

Option Theta

A measure of the rate of decline in the value of an options contract due to the passage of time.

Underlying Asset

The financial asset upon which a derivative's value is based, such as stocks, bonds, commodities, or currencies.