Difference between spanning and a complete market

Assignment Help Corporate Finance

Reference no: EM1316334

Capital structure decisions

An understanding of the concepts of complete markets and spanning are essential for an understanding of the literature on unanimity and several other topics covered in this course.

a) What is the difference between spanning and a complete market? If a particular security is spanned, does that mean the market is complete? If all securities are spanned by other securities, is the market complete?

b) What assumption concerning market completeness and/or spanning is made by Fisher in his separation theorem? What assumption does DeAngelo make in his unanimity theorem?

c) Is DeAngelo's assumption concerning completeness and/or spanning necessary for unanimity?

d) Is it likely that DeAngelo's assumption concerning completeness and/or spanning is satisfied in practice? Explain.

e) If we modify DeAngelo's assumption of no exchange costs in such a way that investors will face different borrowing and lending rates, will capital structure decisions be unanimously supported?

Reference no: EM1316334

Questions Cloud

Framing algebraic equations : Framing algebraic equations

Answer the questions on derivative instruments : Answer the Questions on Derivative instruments and Derivative transactions are designed to increase risk and are used almost exclusively

Graphing the indifference curves for given preferences : Draw a set of indifference curves for Jones, and second set for Smith, with alcoholic drinks on vertical axis and non-alcoholic on the horizontal axis.

What is the mean number of red-blossomed plants : Genetics of peas. According to genetic theory, the blossom colour in the second generation of the certain cross of sweet peas should be red or white in a 3:1 ratio. That is, each plant has probability 3/4 of having red blossoms, and the blossom co..

Difference between spanning and a complete market : Capital structure decisions - What is the difference between spanning and a complete market? If a particular security is spanned, does that mean the market is complete?

There is no proof the new policy is more effective : There is no proof the new policy is more effective, but we cannot finish the policy has no effect on smog. Interpretation of P-value for the given context.

What are the mean and standard deviation of the sample : ACT scores of high school seniors. The scores of high school seniors on the ACT college entrance examination in 2003 had mean JL = 20.80 and standard deviation (J = 4.80. The distribution of scores is only roughly Normal.

Calculate the salary at the end of 24th year from now : Calculate the salary at the end of 24th year from now from the facts and what will 80% of your last year's salary be

Purpose a time line presenting after-tax operating cash flow : Effect of capital structure on companies value per share - purpose a time line presenting the after-tax operating cash flows

User Account

All Pages