FINC 5880 QB S2 2015 Wk 7 Quiz Chapters 22 and 23

no change in Company B's stock price

a decrease in Company B's stock price

an increase in Company A's stock price

a decrease in Company A's stock price

none of the above

Question 2

In a financial merger:

the merged companies combine operations

Equity is used to finance the merger

Debt is used to finance the merger

the merged companies do not combine operations

none of the above

Question 3

Delta Airlines and Northwest Airlines merged in 2008. This merger is an example of:

a vertical merger

a horizontal merger

a conglomerate merger

more information is needed to answer this question

none of the above

Question 4

Delta airlines acquired a refinery in Pennsylvania in 2012. This is an example of:

a vertical merger

a horizontal merger

a conglomerate mergermore information is needed to answer this question

none of the above

Question 5

Company A is interested in acquiring Company B. Estimated present value of Company B is $1 billion.

Company B has 50 million shares of stock outstanding and no debt. Company B's book value is $22.50.

Without considering possible synergies, what is the maximum price per share that Company A should offer?

$16.25

$22.50

$20.00

$25.25

none of the above

Question 6

The December Treasury bond futures contract has a quoted price of 95'18 and the implied interest rate is 3.2% (semiannual). If annual interest rates go up by 1.00 percentage point, what is the value of one contract?

$85,504

$ 69,591

$76,939

$95,523

none of the above

Question 7

Two companies are evaluating a possible swap. Company A can issue floating-rate debt at LIBOR + 1%, and it can issue fixed rate debt at 9%. Company B can issue floating-rate debt at LIBOR + 1.5%, and it can issue fixed-rate debt at 9.4%. If A issues floating-rate debt and B issues fixed-rate debt, and then they engage in the following swap: A will make a fixed 7.95% payment to B, and B will make a floating-rate payment equal to LIBOR to A. Which of the following statements is correct?

The swap is advantageous to A, but not to B

The swap is advantageous to B, but not to A

The swap is advantageous to both A and B

The swap is not advantageous to either A or B

none of the above

Question 8

"The June Treasury bond futures contract has a quoted price of 102'12. Are current market interest rates higher or lower than the standardized rate on a futures contract?

higher, because the contract is selling at a discount

higher, because the contract is selling at a premium

lower, because the contract is selling at a premium

more information is required to answer this question

None of the above answers is correct

Question 9

The June Treasury bond futures contract has a quoted price of 102'12. What is the current value of one contract in dollars?

90,180

90,563

102,120

102,375

none of the above

Question 10

The June Treasury bond futures contract has a quoted price of 102'12. What is the implied annual interest rate?

5.80%

2.90%

5.85%

3.05%

none of the above