Asked by Javier Lopez on May 03, 2024
Verified
Other things being constant, when a firm sells new shares of stock, the
A) supply of the stock increases and the price decreases.
B) supply of the stock decreases and the price increases.
C) demand for the stock increases and the price increases.
D) demand for the stock decreases and the price decreases.
New Shares
Shares that are issued by a company for the first time to the public, typically through an initial public offering (IPO) to raise capital.
- Understand how the issuance of new shares affects stock supply and price.
Verified Answer
VL
Vanessa LaheeMay 05, 2024
Final Answer :
A
Explanation :
When a firm sells new shares of stock, it increases the supply of the stock in the market. According to the law of supply and demand, an increase in supply, with demand remaining constant, typically leads to a decrease in price.
Learning Objectives
- Understand how the issuance of new shares affects stock supply and price.
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