1. Which one of the following statements is incorrect?

a. The price of a stock trading in the market (e.g., AMAZON) arises from interactions of buyers and sellers in the stock market.

b. New information about overall economic trends, industry-related events, political stability, and investor confidence are all reflected in the trading price of a stock.

c. The initial price of a stock (when a company sells shares in the market the first time) is set by the listing company and its advisors.

d. Earnings announcement of a company has no impact on its stock price.

2. how can a company raise money to grow?

a. it can issue an IPO

b. it can trade its stock on the new york stock exchange

c. it can purchase its stock from its stockholders

d. it can pay off its debt

3. Why do stock index funds have a higher rate of return than corporate bonds or savings accounts?

a. There are more people investing in a stock index fund

b. There is less risk with a stock index fund

c. There is more risk with a stock index fund

d. More cash is required to invest in a stock index fund

4. ABC Corp is considering going public. Using the P/E ratio to set the initial price: if earnings per share are $3 and the industry average P/E ratio is 15, which formula generates a safe price for the IPO?

a. 15/3 = $5

b. 15+3 = $18

c. 15 * 3 = $45

d. 15 - 3= $12