Chapter 3 Practice Questions
- 1. Ruddnucker’s Inc. operates a chain of casual dining establishments. Tired of complying with the onerous reporting requirements for public companies, management decides the company should go private, and Ruddnucker’s accordingly makes a tender offer to its existing shareholders. What schedules must Ruddnucker’s file with the SEC in connection with the contemplated transaction?
- I. Schedule 14D-9
- II. Schedule 13E-3
- III. Schedule TO
- IV. Schedule SR
- A. I, III, and IV
- B. I and II only
- C. II and III only
- D. III and IV only
- 2. A value investor is most likely to purchase a stock with which of the following attributes?
- A. An unusually low price/earnings ratio
- B. A history of paying dividends reliably
- C. The potential for an extremely high rate of growth
- D. A relatively low price/earnings ratio in light of the potential for growth
- 3. Which of the following is true when an investor takes a short position in a security?
- I. The investor may be pursuing a strategy to protect gains in a long position in that security.
- II. It requires an initial purchase of a fraction of the total number of shares in which the investor takes a short position.
- III. The investor must buy securities on a specified date to cover the short.
- IV. The total net profit, if any, equals the decline in the price of the security between the time the shares are sold short and the time the covering purchase is made.
- A. I, II, III, and IV
- B. III and IV only
- C. I only
- D. III only
- 4. Ann “Indy” Vijalin-Vestor has an online brokerage account. Ann is pursuing a specific investment strategy that involves buying stock in companies whose share prices have dropped precipitously following bad publicity. Of the following investment strategies, Ann is most likely to be following a(n):
- A.&