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?

Select an answer:

• P/E ratio 15 - industry expectation 5 + EPS 3 = $30

• P/E ratio 15 / EPS $3 = $5

• P/E ratio 15 + EPS $3 = $18

• P/E ratio 15 x EPS $3 = $45

You are starting to work seriously on your future financial stability. How can you avoid the short-term risk inherent to investing?

Select an answer:

• invest in stock from well-established companies

• focus on paying off your debts

• have a long-term planning horizon

• seek out investments with high returns

Which feature of the stock market makes people more likely to invest in a corporation?

Select an answer:

• Physical stock markets are the only place where stocks can be purchased and traded.

• Shares of every corporation in the United States can be purchased on the New York Stock Exchange.

• If someone no longer wants to be an owner of the corporation, the shares can be sold.

• People enjoy gambling, and the markets provide them with a place to gamble.