What %Age of Direct Expense Is Required to Market Stock

question 124

Multiple Choice

What %age of direct expense is required to market stock if the issuer incurs $1 million in other expenses to sell 3 million shares at $40 each to an underwriter and the underwriter sells the shares at $43 each?

• A)6.98%
• B)7.19%
• C)7.75%
• D)8.33% underwriting spread: 3 million x $3 = $9 million

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Definitions:

Prospect Theory

A theory in behavioral economics explaining the decision-making process of individuals when faced with alternatives that have uncertain outcomes, with known probabilities of these outcomes.

Behavioral Economics

A field of economic research that studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

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Individuals or groups responsible for making decisions and laws that govern a society, often within governmental institutions.