The text gives a number of valid

The text gives a number of valid

The text gives a number of valid, acceptable reasons for companies to merge.  Which of the following is not acceptable?Answer

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A.Synergistic benefits arising from mergers.

B.  Reduction in competition resulting from mergers.

C.  Attempts to stabilize earnings by diversifying.

D. Attempts to minimize taxes by acquiring a firm with large accumulated losses that can be used immediately.

E. Using surplus cash to acquire another firm and prevent unfavorable tax consequences for shareholders.

Which of the following statements is CORRECT?Answer

A. An option’s value is determined by its exercise value, which is the market price of the stock less its strike price.  Thus, an option can’t sell for more than its exercise value.

B.  As stock price rises, the premium portion of an option on a stock increases because the difference between the price of the stock and the fixed strike price increases.

C.  If the company is consistently profitable, its call options will always be in the money.

D.   The market value of an option depends in part on the option’s time to maturity and on the variability of the underlying stock’s price.

E. The potential loss on an option decreases as the option sells at higher and higher prices because the profit margin gets bigger.

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