Imagine You Are Creating a New Product to Sell in an Up-And-Coming

question 47

Multiple Choice

Imagine you are creating a new product to sell in an up-and-coming market.Which of the following statements indicates that it would be easy for you as the new entrant to compete in this market?

• A)The threat of new entrants force is high in the up-and-coming market.
• B)The threat of new entrants force is low in the up-and-coming market.
• C)The threat of new entrants force is impossible to define in the up-and-coming market.
• D)All of these are correct, depending on the time of year.

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Definitions:

IPO Underpricing

The phenomenon where new shares of a company are sold to the public at a price lower than the market price after they start trading.

Underwriter

A financial specialist who evaluates the risks involved in a financial transaction, typically insurance or the issuing of new securities, and decides the terms under which the transaction can be offered.

Firm Commitment Underwriting

Underwriter buys the entire issue, assuming full financial responsibility for any unsold shares.

IPO Underpricing

The phenomenon where the initial offering price of a stock is set lower than the market price on its first day of trading.