Which statement is NOT CORRECT?

a.         Multinational firms can reduce their tax liability through transfer pricing.

b.         Countries that adopt a fixed exchange rate give up control of their monetary policy.

c.         US companies must follow all US laws regardless of where their operations are.

The current spot rate is $.40/SF. The 6-month forward rate is $.41/SF. A call option that expires in 6-months on 100,000 SF with a strike price of $.40/SF is selling for $1,900. A put option that expires in 6-months on 100,000 SF with a strike price of $.40/SF is selling for $100. Six months from now, the spot rate will be $.39/SF (this information is unknown right now, but I’m telling you).

If you bought the put option, how much would you have made (or lost) including the original investment?

a Lost $900

b Lost $100

c Made $900

Which statement is FALSE?

b In a Spin-off, common stock in a division or subsidiary is distributed to shareholders of the parent company on a pro rata basis.

c If the shareholders gain from a merger comes at the expense of other stakeholders, then this is called hubris

d A tender offer is when the acquiring firm makes their offer directly to the target firm shareholders.