. State and explain M&M’s Proposition I and II. How can shareholders be indifferent to increased leverage when it increases expected return? 2. Which one, dividend increase and stock repurchase, signals greater future profits? Why? 3. China launched its first stock options on the Shanghai Stock Exchange in Feb 2015. The options are based on the exchange-trade fund (ETF) that tracks the SSE 50 index, composed of the 50 most heavily weighted stocks on the bourse. Give an example of stock option traded in the HK Stock Market. What is its underlying stock, current price and strike price?
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