which of the following statements is correct? the term \ipo\ stands for introductory price offered, and it…

which of the following statements is correct? the term \ipo\ stands for introductory price offered, and it is the price at which shares of a new company are offered to the public. ipo prices are generally established by the market, and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public. in a \dutch auction,\ investors who want to buy shares in an ipo submit bids indicating how many shares they want to buy and the price they are willing to pay. the company determines how many shares it wants to sell. the highest price that enables the company to sell the desired number of shares is the price that all buyers must pay. it is possible that the price set in an ipo is so high that investors will refuse to buy the number of shares that the company wants to sell. in this situation, the ipo is said to be oversubscribed. it is possible that the price set in an ipo is so low that investors will want to buy more shares than the company wants to sell. in that case, the company will have to issue more shares than it wants to sell. question 31 (2.5 points)

which of the following statements is correct? the term \ipo\ stands for introductory price offered, and it is the price at which shares of a new company are offered to the public. ipo prices are generally established by the market, and buyers of the new stock must pay the price that prevails at the close of trading on the day the stock is offered to the public. in a \dutch auction,\ investors who want to buy shares in an ipo submit bids indicating how many shares they want to buy and the price they are willing to pay. the company determines how many shares it wants to sell. the highest price that enables the company to sell the desired number of shares is the price that all buyers must pay. it is possible that the price set in an ipo is so high that investors will refuse to buy the number of shares that the company wants to sell. in this situation, the ipo is said to be oversubscribed. it is possible that the price set in an ipo is so low that investors will want to buy more shares than the company wants to sell. in that case, the company will have to issue more shares than it wants to sell. question 31 (2.5 points)

Answer

Brief Explanations:

  • "IPO" stands for Initial Public Offering, not Introductory Price Offered, so the first statement is incorrect.
  • IPO prices are determined through a process often involving underwriters and the company, not just by the market - close price on the offer day, so the second statement is incorrect.
  • In a Dutch auction, investors submit bids with quantity and price, and the company sets a price based on its desired share - sale quantity, which is the correct description for a Dutch auction.
  • If investors refuse to buy the number of shares the company wants to sell because the price is too high, it is under - subscribed, not over - subscribed.
  • If the price is too low and investors want more shares, the company doesn't have to issue more shares.

Answer:

C. In a "Dutch auction," investors who want to buy shares in an IPO submit bids indicating how many shares they want to buy and the price they are willing to pay. The company determines how many shares it wants to sell. The highest price that enables the company to sell the desired number of shares is the price that all buyers must pay.