You are examining the common stocks of two (closely related) companies, company ABC, whose goal is to merge with another company, company XYZ. You have a strong expectation that the deal will go ahead...

You are examining the common stocks of two (closely related) companies, company ABC, whose goal is to merge with another company, company XYZ. You have a strong expectation that the deal will go ahead and notice that ABC’s stock is relatively overvalued and XYZ’s stock is relatively undervalued. What would be an appropriate investment strategy to follow so that you can profit from both companies’ actions (assuming that you were correct on your expectations)? Would you change your strategy if you had moderate (conservative) expectations about the deal?