Stockholders like mutual funds; therefore, they will pay a premium for the shares of a firm that is a conglomerate because the firm is essentially a mutual fund.

Question

Quizplus · Accepted Answer

Mutual funds and conglomerates operate under different principles and structures. Mutual funds pool money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities, managed by professional fund managers. Conglomerates are large corporations that own a collection of smaller companies in different industries, managed directly under the conglomerate's corporate structure. Investors may not necessarily pay a premium for conglomerate shares simply because it resembles a mutual fund, as their investment strategies, risks, and returns can differ significantly.

Stockholders Like Mutual Funds; Therefore, They Will Pay a Premium