Assume an Issuer Incurs $1 Million in Other Expenses to Sell

question 57

Multiple Choice

Assume an 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.By the end of the first day's trading,the issuing company's stock price had risen to $70.In percentage terms,how much of the day's closing market value was absorbed by the total costs associated with the issue?

• A) 13.33%
• B) 23.33%
• C) 33.33%
• D) 43.33%

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Definitions:

Chi-square Test

An analytical procedure employed to find out if a considerable link is present between two categorical factors.

Goodness-of-fit Test

Statistical tests that measure how well observed sample data fits a distribution from a population with a specified distribution.

Categorical Variable

A type of variable that can take on one of a limited, and usually fixed, number of possible values, assigning each individual or observation to a particular group or category.

Degrees of Freedom

The number of independent values or quantities which can vary in the analysis of statistical parameters.