Question
In: Finance
Stock prices are: a. set by the company issuing the stock. b. set by the central...
Stock prices are:
a. set by the company issuing the stock.
b. set by the central bank.
c. determined by market transactions.
d. unrelated to the value of the company issuing the stock
Solutions
Expert Solution
Answer is c. determined by market transactions.
Stock prices are determined by the economics of demand and supply which is related to market transactions. Higher the demand of stock by investors, higher will be its price in the market. Lower demand will be marked by lower prices.
a is incorrect, since issuer of common stock, does not set the prices of stock. Has this been the case, it would have been a severe case of conflict of interest, where companies would have artificially inflated their share prices.
c is incorrect, since stock market transactions are out of the ambit of central bank regulations. stock markets are governed by SEC.
d is incorrect since stock price is related to the value of company issuing the stock. Higher the value of a company - may be by virtue of its business profile, competitive position, financial strength, is related to stock price. Better the company, higher will be the value of that company's stock.
jeff jeffy answered 1 year agoRelated Solutions
The Central Limit Theorem Stock Prices The following table lists initial public offering (IPO) stock prices...
The Central Limit Theorem Stock Prices The following table lists
initial public offering (IPO) stock prices for all 1999 stocks that
at least doubled in value during the first day of trading. This is
historical data.
$17.00 $23.00 $14.00 $16.00 $12.00 $26.00 $20.00 $22.00 $14.00
$15.00 $22.00 $18.00 $18.00 $21.00 $21.00 $19.00 $15.00 $21.00
$18.00 $17.00 $15.00 $25.00 $14.00 $30.00 $16.00 $10.00 $20.00
$12.00 $16.00 $17.44 $16.00 $14.00 $15.00 $20.00 $20.00 $16.00
$17.00 $16.00 $15.00 $15.00 $19.00 $48.00 $16.00 $18.00...
1. Company A is currently suing company B for IP infringement. Their stock prices currently are...
1. Company A is currently suing company B for IP infringement.
Their stock prices currently are pA = $10 and pB = $8. If A wins
the lawsuit, its stock will go up to $15 and B’s stock will drop to
$5. If A loses, however, its stock will be worth $9, and B’s stock
will rise to $10. Neither stock pays dividends. Assume no arbitrage
and consider whether A wins or not to represent the only two states
of...
A company is formed by issuing common stock for $1,000 in cash and then transacts as...
A company is formed by issuing common stock for $1,000 in cash
and then transacts as follows over its first five days of business,
with all purchases and sales on credit:
Day 1 - Buys one unit of inventory for $10.
Day 2 - Buys one unit of inventory for $15.
Day 3 - Buys one unit of inventory for $20.
Day 4 - Sells one unit of inventory for $100.
Day 5 - Sells two units of inventory for...
A company is formed by issuing common stock for $1,000 in cash and then transacts as...
A company is formed by issuing common stock for $1,000 in cash
and then transacts as follows over its first five days of business,
with all purchases and sales on credit:
Day 1 - Buys one unit of inventory for $10.
Day 2 - Buys one unit of inventory for $15.
Day 3 - Buys one unit of inventory for $20.
Day 4 - Sells one unit of inventory for $100.
Day 5 - Sells two units of inventory for...
Explain the pros and cons of issuing new stock, reissuing treasury stock (if applicable), and issuing...
Explain the pros and cons of issuing new stock, reissuing
treasury stock (if applicable), and issuing convertible bonds. In
addition, include your recommendations on how a company could
generate cash from issuing new common stock, preferred stock,
convertible bonds or reissuing treasury stock.
"Stock Dividends" Please respond to the following: A company is considering issuing a 10% stock dividend...
"Stock
Dividends"
Please respond to the following:
A company is considering issuing a 10% stock dividend to common
stockholders. What are the accounting implications of the stock
dividend?
Should the stock dividend be issued to all stockholders of
record or to stockholders of record excluding shares held as
treasury stock? Why or why not?
The accompanying data set provides the closing prices for four stocks and the stock exchange over...
The accompanying data set provides the closing prices for four
stocks and the stock exchange over 12 days:
Date
A
B
C
D
Stock Exchange
9/3/10
127.37
18.34
21.03
15.51
10432.45
9/7/10
127.15
18.18
20.44
15.51
10334.67
9/8/10
124.92
17.88
20.57
15.82
10468.41
9/9/10
127.35
17.95
20.52
16.02
10498.61
9/10/10
128.37
17.82
20.42
15.98
10563.84
9/13/10
128.36
18.64
21.16
16.21
10616.07
9/14/10
128.61
18.83
21.29
16.22
10565.83
9/15/10
130.17
18.79
21.69
16.25
10627.97
9/16/10
130.34
19.16
21.76
16.36
10595.39
9/17/10...
The accompanying data set provides the closing prices for four stocks and the stock exchange over...
The accompanying data set provides the closing prices for four
stocks and the stock exchange over 12 days:
Date
A
B
C
D
Stock Exchange
9/3/10
127.37
18.34
21.03
15.51
10432.45
9/7/10
127.15
18.18
20.44
15.51
10334.67
9/8/10
124.92
17.88
20.57
15.82
10468.41
9/9/10
127.35
17.95
20.52
16.02
10498.61
9/10/10
128.37
17.82
20.42
15.98
10563.84
9/13/10
128.36
18.64
21.16
16.21
10616.07
9/14/10
128.61
18.83
21.29
16.22
10565.83
9/15/10
130.17
18.79
21.69
16.25
10627.97
9/16/10
130.34
19.16
21.76
16.36
10595.39
9/17/10...
The accompanying data set provides the closing prices for four stocks and the stock exchange over...
The accompanying data set provides the closing prices for four
stocks and the stock exchange over 12 days:
Date
A
B
C
D
Stock Exchange
9/3/10
127.37
18.34
21.03
15.51
10432.45
9/7/10
127.15
18.18
20.44
15.51
10334.67
9/8/10
124.92
17.88
20.57
15.82
10468.41
9/9/10
127.35
17.95
20.52
16.02
10498.61
9/10/10
128.37
17.82
20.42
15.98
10563.84
9/13/10
128.36
18.64
21.16
16.21
10616.07
9/14/10
128.61
18.83
21.29
16.22
10565.83
9/15/10
130.17
18.79
21.69
16.25
10627.97
9/16/10
130.34
19.16
21.76
16.36
10595.39
9/17/10...
Assume that you set up a portfolio composed of Stock A and Stock B. You invested...
Assume that you set up a portfolio composed of Stock A and Stock
B. You invested 40% of your capital on Stock A whereas 60% of your
capital on Stock B. During the last 3 years, your portfolio showed
the following performance.
Stock A
Stock B
2016
0.1
-0.1
2017
0.2
0
2018
0.3
0.4
What are your average portfolio return and risk (standard
deviation or variance) during last three years? (20 points)
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