Discuss the Two Mutual Fund Theorem

question 14

Essay

Discuss the two mutual fund theorem.Show why it arises.(A diagram may help.)

---

Definitions:

Administrative Expenses

Overhead or general expenses related to the day-to-day operations of a business, including salaries of non-sales personnel, rent, utilities, and office supplies.

Unsecured Creditors

Creditors who have lent money without taking collateral. If the borrower defaults, these creditors stand behind secured creditors in the priority of claims.

Stockholders

Investors who own shares of stock in a corporation, holding a claim on its assets and earnings.

Spin-off

The creation of an independent company through the sale or distribution of new shares of an existing part of a parent corporation.