If a stock is initially offered to the public for $20 in an underwriting but the price immediately falls to $15,
1) the firm received $20 a share
2) the initial investors sustain a loss
3) demand exceeded supply
4) supply exceeded demand
A)1, 2, and 3
B)1, 2, and 4
C)2 and 3
D)2 and 4

Question

If a stock is initially offered to the public for $20 in an underwriting but the price immediately falls to $15,​
1) the firm received $20 a share
2) the initial investors sustain a loss
3) demand exceeded supply
4) supply exceeded demand
A)​1, 2, and 3
B)​1, 2, and 4
C)​2 and 3
D)​2 and 4

Quizplus · Accepted Answer

The firm received $20 a share initially, and the price falling to $15 means that supply exceeded demand, and the initial investors sustain a loss. Therefore, options 1, 2, and 4 are correct. Demand exceeding supply would cause the stock price to rise, which is not the case here.

If a Stock Is Initially Offered to the Public for $20