Question
An investor owns 500 shares of stock in a firm with a debt/equity ratio = 1.0. The investor prefers an all-equity firm. If the stock
An investor owns 500 shares of stock in a firm with a debt/equity ratio = 1.0. The investor prefers an all-equity firm. If the stock price is $2 per share, what should the investor do?
| A. | Borrow $500 and buy 250 new shares. |
| B. | Borrow $1,500 and buy 750 new shares. |
| C. | Borrow $2,500 and buy 1,250 new shares. |
| D. | Sell 250 shares and lend $500. |
| E. | Sell 25 shares and lend $50. |
An investor owns 500 shares of stock in a Montreal firm with a debt/equity ratio = 1.0. The investor prefers a debt/equity ratio = 1.5. If the stock price is $2 per share, what should the investor do?
| A. | Borrow $500 and buy 250 new shares. |
| B. | Borrow $1,500 and buy 750 new shares. |
| C. | Borrow $2,500 and buy 1,250 new shares. |
| D. | Sell 250 shares and lend $500. |
| E. | Sell 25 shares and lend $50. |
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Calculus For Business, Economics And The Social And Life Sciences
Authors: Laurence Hoffmann, Gerald Bradley, David Sobecki, Michael Price
11th Brief Edition
978-0073532387, 007353238X
