1. At the time a management group of RJR Nabisco initially considered engaging in a leveraged buyout, RJRs stock price was less than $70 per share. Ultimately, RJR was acquired by the firm Kohlberg Kravis Roberts for about $108 per share. Does the large discrepancy between the stock price before an acquistion was considered and after the acqusition mean that RJRs price was initially undervalued? If so, does this imply that the market was inefficient?

21. Consider the prevailing conditions that could affect the demand for stocks, including inflation, the economy, the budget deficit, the Feds monetary policy, political conditions, and the general mood of investors. Based on these conditions, do you think stock prices will increase or decrease during this semester? Offer some logic to support your answer. Which factor will have the biggest impact on stock prices?