Which of the followings will not generate cash flows to the firm?

A. Carve-out

B. Tracking share.

C. Spin-off.

D. Sale of asset.

Question 3

DIY has 168,128 shares and 19,620 warrants outstanding. The stock price is 28.3. If an investor

can purchase 0.2 share with one warrant and $20.3 and all warrants are exercised immediately,

what will be the market price of the stock? (Assuming that one can purchase a fraction of a

share.)

Question 4

Which of the following is true?

A. When a warrant is exercised, the firm will repurchase the shares.

B. Exercise of a call option does not affect share value, but warrant exercise does.

C. When a call option is exercised, the firm will issue new shares.

D. The issue procedures for calls and warrants are quite similar.

Question 5

DIY issues a convertible bond with face value of $1,000. The market price of the bond is $1,041

and holders can exchange the bond for 26.4 shares of DIY stock. If the stock is selling for $28.0,

what is the conversion premium?

Question 6

When you write a call and put with the same exercise price, you expect:

A. The price of the underlying asset will decrease a lot.

B. The price of the underlying asset will neither increase nor decrease a lot.

C. The price of the underlying asset will increase a lot.

D. The price of the underlying asset will either increase or decrease a lot.

Question 7

If there is a reduction in risk but no synergy gain in a merger,

A. There is no effect on the bondholders or stockholders.

B. The bondholders gain in value while the stockholders lose value.

C. The stockholders gain in value while the bondholders lose value.

D. Both the bondholders and stockholders are better off.