Sol Company Has Announced Plans to Acquire Luna Corporation by Swapping

question 24

Multiple Choice

Sol Company has announced plans to acquire Luna Corporation by swapping 0.55 shares of Sol stock for each share of Luna stock.After the announcement,Sol traded for $23 per share,and Luna traded for $11 per share.Assuming the takeover is successful,which of the following is the most appropriate merger-arbitrage strategy?

• A)Buy 100 shares of Sol,short sell 100 shares of Luna.
• B)Buy 55 shares of Luna,short sell 100 shares of Sol.
• C)Buy 100 shares of Luna,short sell 55 shares of Sol.
• D)Buy 100 shares of Sol,short sell 55 shares of Luna.
• E)Buy 55 shares of Sol,short sell 100 shares of Luna.

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Definitions:

Mexican Peso

The Mexican Peso is the official currency of Mexico, represented by the symbol $ or MX$ to distinguish it from other dollar-denominated currencies.

Dollar Value

The worth or purchasing power of the United States dollar in terms of the amount of goods or services that one unit of money can buy.

Trade Deficit

A situation where a country's imports exceed its exports, leading to a negative balance of trade.

International Basis

Engaging in business or transactions that involve entities in multiple countries or global considerations.