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problem: An understanding of the concepts of complete markets & spanning are essential for an understanding of the literature on unanimity & several other topics covered in this course.

[A] Find the difference between spanning and a complete market? If a particular security is spanned, does that mean market is complete? If all securities are spanned by other securities, is market complete?

[B] What assumption concerning market completeness and/or spanning is made by Fisher in his separation theorem? Find what assumption does DeAngelo make in his unanimity theorem?

[C] Is DeAngelo’s assumption concerning completeness and/or spanning necessary for unanimity?

[D] Is it likely that DeAngelo’s assumption concerning completeness and/or spanning is satisfied in practice? describe.

[E] If we modify DeAngelo’s assumption of no exchange costs in such a way that investors will face different borrowing and lending rates, will capital structure decisions be unanimously supported?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M921361

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