Question

Which of the following statements is CORRECT?a. Well-designed bond covenants are useful for reducing potential conflicts between stockholders and managers.b. The efficiency of the U.S. economy would probably be increased if hostile takeovers were absolutely forbidden.c. Stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value.d. The bid price in a hostile takeover is generally above the price before the takeover attempt is announced, because otherwise there would be no incentive for the stockholders to sell to the hostile bidder and the takeover attempt would probably fail.e. Takeovers are most likely to be attempted if the target firm's stock price is above its intrinsic value.

Answer 1

The bid price is the highest price a buyer, market-maker or dealer is willing to pay for a security or other assets.

The correct statement is D. The bid price in a hostile takeover is generally above the price before the takeover attempt is announced, because otherwise there would be no incentive for the stockholders to sell to the hostile bidder and the takeover attempt would probably fail.