Question: For a typical merger arbitrage play with an ongoing merger
For a typical merger arbitrage play with an ongoing merger, how does the hedge fund manager make a profit if he or she expects the merger to be completed?
Answer to relevant QuestionsIn Figure 1–4, what has been the highest return investment category over the 79-year period? What has been the lowest? Assuming risk is measured by the standard deviation, what can you say about the relationship of risk to ...Assume the real rate of return in the economy is 2.5 percent, the expected rate of inflation is 5 percent, and the risk premium is 5.8 percent. Compute the risk-free rate (Formula 1-3) and required rate of return. Explain how a convertible arbitrage fund works. Describe the strategy behind buyout funds. Explain alpha as a measure of performance.
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