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8.1 Stocks: An Introduction

Authored by Emmalee Handshy

Mathematics

11th Grade

CCSS covered

Used 1+ times

8.1 Stocks: An Introduction
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10 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Why might a business owner sell stock to outside investors?

to raise money for expansion

to maximize control over the firm's operations

to minimize the need to generate a profit consistently

both to raise money for expansion and to maximize control over the firm's operations

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

A midsize firm plans to issue 10 million shares during an IPO. The investment banker (underwriter) plans to sell shares at $22.50; however, many investors believe the company should be valued at $32.00 per share. If the underwriter charges a $3 million fee to undertake the IPO, how much will the firm raise in the IPO?

$320,000,000

$317,000,000

$225,000,000

$222,000,000

Answer explanation

To determine how much capital is raised, multiply the IPO issue share price by the outstanding shares and then subtract the underwriter’s fee.

$22.50 x 10,000,000 = $225,000,000 - $3,000,000 = ?

Tags

CCSS.7.EE.B.3

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Stock of Terry Motors, Inc. was recently traded on a stock exchange as $108 bid. The spread price was $2. What was the ask price?

$106

$108

$110

$112

Answer explanation

The bid price ($108) indicates how much another investor will pay a current shareholder for stock. The ask price indicates the price an investor will sell stock to another investor. The ask price is always higher than the bid price. In this case, add $2 to the bid price to arrive at the answer

Tags

CCSS.6.NS.C.5

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Your next-door neighbor owns a local restaurant. She currently has gross sales of $13 million. Her expenses, which include ingredients, rent, and personnel, run $11.5 million. What is her net profit or loss?

$1.5 million loss

$1.5 million profit

$11 million profit

$13 million loss

Tags

CCSS.7.EE.B.3

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Your next-door neighbor owns a local restaurant. She currently has gross sales of $13 million. Her expenses, which include ingredients, rent, and personnel, run $11.5 million. You neighbor is considering bringing in outside investors. She would like to issue 2 million shares of stock and sell the stock for $25 each in an IPO. If she does this, how much would someone who purchases one share earn? In other words, what is the earnings per share for the company?

$0.03

$0.06

$0.25

$0.75

Answer explanation

First, calculate net profit ($13,000,000 - $11,500,000)

Next, divide $1,500,000 by the 2,000,000 million shares to arrive at the earnings per share (you may need to estimate)

Tags

CCSS.8.EE.C.7B

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The primary way stock investors make money is through:

I. capital gains

II. dividends

III. interest

I only

III only

I and II only

I and III only

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following is TRUE if Nick purchases 100 shares of an IPO of $35 per share and sells the shares for $40 each? (Refer to the capital gain discussion from a previous chapter if needed)

she will have 5% capital gain

she will have 14% dividend

she will have $500 capital gain

she will have$5 dividend per share

Answer explanation

First, determine Nick’s profit or loss per share

Multiply the profit by the number of shares sold to arrive at the amount of the capital gain

Tags

CCSS.8.EE.C.7B

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