Suppose you are a Merger Arbitrage trader and that you believe that the probabilities in the table below encompass the full range of possible scenarios for a given announced merger transaction, along with your estimated percentage annualized spreads associated with each scenario.

What investment decision would you make if the spread is currently trading at 3.89% annualized and describe why ?

Scenario Description Merger completes on announced terms Higher counterbid for target announced Takeover bid for acquiror announced MAC triggers Target accounting fraud uncovered % Probability 82% 9% 5% 3% 1% % Spread 6% -11% 13% 21% 31% Scenario Description Merger completes on announced terms Higher counterbid for target announced Takeover bid for acquiror announced MAC triggers Target accounting fraud uncovered % Probability 82% 9% 5% 3% 1% % Spread 6% -11% 13% 21% 31%