6. JMK Inc. has just announced a hostile takeover bid for all outstanding shares

Question

6. JMK Inc. has just announced a hostile takeover bid for all outstanding shares of PKE Ltd How would a merger arbitrage hedge fund potentially try to profit from this takeover? a) Buy the shares of JMK and PKE b) Sell short the shares of JMK and PKE c) Buy the shares of JMK and sell short the shares of PKE. d) Buy the shares of PKE and sell short the shares of JMK. A high-yield bond hedge fund manager bought a corporate bond with a coupon rate of 7% and a yield of 1 1%. What is the hedge fund manager most likely hoping for? 7, a) An increase in the bond's liquidity. b) An increase in the bond's coupon rate. c) An increase in the issuing company's credit rating. d) An increase in the bond's premium above par value. The primary objective of the HRM Fund is to invest in the equity or debt of companies that are facing bankruptcy or in the midst of reorganizing. Which of the following hedge fund strategies is being used? a) Relative value funds 8. b) Dedicated short bias funds. c) Distressed securities funds. d) Equity market neutral funds. Which of the following best describes the time period that the initial investment in a hedge fund cannot be removed? 9. a) Freeze period. b) Hurdle date. c) Lockup period. d) Liquidity period.

Explanation / Answer

Q6- Answer d- Hostile take over will result in spike in price of shares of company being taken over.

Q7-Answer d- Increase in bond premium above par value.

Q8-Answer c- These are called distressed securities funds.

Q9 Answer c- It is known as lock up period.

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