Morgan Stanley acquired E*Trade this year!

(a) Provide a brief description of Morgan Stanley and E*Trade. You will want to mention things like: industry where they operate, size of each company in terms of revenues, number of clients each of the companies serve (if available), and other relevant information.

(b) From a strategic standpoint, why did Morgan Stanley want to acquire E*Trade?

(c) Describe the terms of the deals. Make sure to mention: deal structure (cash, stock or mix), total value of the transaction, exchange rate (if applicable), announcement date, date the transaction was completed, and any other relevant information.

(d) Calculate Morgan Stanley's and E*Trade's cumulative abnormal returns (-1, 1) around the date the acquisition was announced. Use the risk adjusted returns model.

• Requirements: Use 1 year daily data for your calculations for each company.
• Use the S&P500 as a market index for your calculations.

(e) Describe your observations for the results you calculated in the previous question. Did any of the two companies experience positive abnormal returns?

(f) What percentage of Morgan Stanley will E*Trade shareholders now own?

(g) Say that Morgan Stanley had financed this acquisition with 100% debt. How would this have changed Morgan Stanley's financial position and what would be the effect on its leverage ratio?