The Acme Corporation has been acquired by the Conglomerate Corporation. To help
ID: 2806704 • Letter: T
Question
The Acme Corporation has been acquired by the Conglomerate Corporation. To help finance the takeover, Conglomerate is going to liquidate the overfunded portion of Acme’s pension fund. The assets listed below are going to be liquidated. Listed are their face values, liquidation values today, and their anticipated liquidation values one year from now (their fair market values). Asset Face Value Current Liquidation Value One-Year Liquidation Value IBM stock $16,000 $15,900 $16,500 GE bonds 4,000 2,000 3,600 Treasury securities 21,000 19,000 20,000 Calculate the one-year liquidity index for these securities.
Explanation / Answer
Total face value of the stocks = 16000+4000+21000 = 41000
One year liquidity index = (16000/41000)*(15900/16500) + (4000/41000)*(2000/3600)+ (21000/41000)*(19000/20000)
= 0.9168
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