How Stock Repurchases Differ from Dividends: You Purchased 3,000 Shares

question 63

Multiple Choice

How stock repurchases differ from dividends: You purchased 3,000 shares of Purple Stuff Beverage Co. four years ago at $30 per share. You have just received a mailing from the company announcing a fixed-price tender offer stock repurchase at $36 per share. Capital gains are taxed at 15 percent. If you participate in the repurchase, how much will you receive?

• A) $18,000
• B) $91,800
• C) $105,300
• D) $108,800

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Definitions:

Dollar Rally

A situation where the value of the U.S. dollar strengthens significantly against a basket of other currencies.

Foreign Currencies

Currencies used in countries other than one’s own, involved in international trading and foreign exchange markets.

Uncovered Interest Parity

A financial theory stating that the difference in interest rates between two countries equals the expected change in exchange rates between their currencies.

Exchange Rate Changes

Fluctuations in the value of one currency relative to another, affecting international trade and investments.