Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / Copenhagen Business School FINANCE Corporate Quiz 10 Question1)You observe that a CEO of a well-known company is selling out of the company stock

Copenhagen Business School FINANCE Corporate Quiz 10 Question1)You observe that a CEO of a well-known company is selling out of the company stock

Finance

Copenhagen Business School

FINANCE Corporate

Quiz 10

Question1)You observe that a CEO of a well-known company is selling out of the company stock. The stock was held in the CEO's private portfolio. This behaviour sends (without doubt) the following signal:

  • The CEO has negative insider information about the future prospects of the firm.
  • The CEO wants to diversify the CEO's private portfolio.
  • The CEO is about to leave the firm and retire.
  • None of the above.

If you receive compensation in stocks you don’t want to be too heavily invested in one stock, but diversify, and it could also be that there is asymmetric information, but since it says without doubt the correct answer is none of the above.

 

Question 2

If some shareholders have a short investment horizon and others have a long investment horizon, what should the CEO of the company do?

  • The CEO should do short term investments if the majority of shareholders have a short investment horizon.
  • The CEO should always do long term investments.
  • The CEO should not care about shareholders' investment horizon.
  • None of the above.

He should just care about maximizing shareholder value. If he should maximize the value, it should

benefit both short term and long term.

 

Question 3

Which of the following constitutes a risk management failure?

  • Failure to avoid bankruptcy. ? this is not a risk management failure.
  • Failure to eliminate all types of risk inside the company. ? it is not a good idea to eliminate all risk because then you only have the risk free rate ? this is not a risk management failure
  • Failure to maintain the target risk level.

 

  • None of the above.

Question 4

A company announces that they will hire a new CEO who is expected to increase the firm's value. The CEO will start next month. She will be compensated with stock options and the options will have a strike price equal to the stock price on the day before she starts. You are asked to evaluate whether this is a good compensation package. What will happen to the stock price:

  • The stock price should increase on the day she starts in order to reflect the expected increase in firm value.
  • There should be no stock price reaction when she starts but the stock price will jump in value once she later delivers what she is expected to do.
  • The stock price should increase on the day of the announcement in order to reflect future expectations.  as soon as the information is public, it should be reflected in the stock price.
  • None of the above.

Option 1

Low Cost Option
Download this past answer in few clicks

2.83 USD

PURCHASE SOLUTION

Already member?


Option 2

Custom new solution created by our subject matter experts

GET A QUOTE