Firm A (whose shares were trading at $10 per share at close yesterday) makes an offer (at 9 pm) to buy shares in Firm B (whose shares were trading at $5 per share at close yesterday).. What is the announced buying price?

The offer is an all-cash deal, with a 15% premium over the last trading price. Tomorrow morning at first trade (9:30 am) shares in Firm B are trading at $5.50 per share. Does this represent an arbitrage opportunity? What is the max you can earn using your strategy and $100 dollars of capital (no more borrowing allowed)?

 

Answer rating: 100% (QA)

The announced buying price is the offer price made by Firm A to buy shares in Firm B It is stated th... View the full answer