oneboy

ananda2 Wrote:
-------------------------------------------------------
> I would say false and true.
>
> A company is not liquidating stock. The company
> actualluy buys the stock in the open market to
> push up the price.
>
> Secondly for an ESOP plan, Diversification can
> become an issue, as a person can tie up too much
> of his financial capital in company stock, which
> is related to his human capital as well

1 is definitely true. Main purpose of an ESOP is to purchase a concentrated position from owners or founders on favorable tax terms. Generally there is a buttload of leverage involved as well.

mik82

Paraguay, your answer is the answer. Thanks for the explanation.

2. is from book2, p379....agreed, a wording problem.

Zestt

I would say false and true.

A company is not liquidating stock. The company actualluy buys the stock in the open market to push up the price.

Secondly for an ESOP plan, Diversification can become an issue, as a person can tie up too much of his financial capital in company stock, which is related to his human capital as well

Windjam

T, T after rereading question.

I don't get the wording it makes no sense.

ESOPS are very undiversified and represent huge amounts of the net worth of the participants. HC/FC highly correlated. Must use other methods to diversify.



Edited 2 time(s). Last edit at Monday, May 23, 2011 at 08:46PM by Paraguay.

mar350

1T
2 im not sure what u are asking, are u asking if they should be concerned ( then yes) or are u asking are they being concerned by participation (then no)
in any case i have to choose one so

F

Unforseen

1. True
2. False