Table 1 shows closing share prices for a bicycle manufacturer traded on a stock market. The firm issued the shares several years ago, but investors now buy ...

Assessment: Economics 9214 | Paper 1 Mock 01 | Written Paper 1 Subject: Economics - 9214

Question 1 Report

Table 1 shows closing share prices for a bicycle manufacturer traded on a stock market. The firm issued the shares several years ago, but investors now buy and sell them between themselves.

Table 1


(a) Calculate the rise in the share price from Monday to Wednesday. [1]
(b) What type of financial market is used when investors trade existing shares? [1]
(c) Explain why the price of the firm's shares may change when news about its expected profit is published. [1]

Answer Details

(a) The share-price table is not visible in the supplied question text, but the mark scheme gives a Monday price of 148 cents and Wednesday price of 156 cents:

\[156\text{ cents}-148\text{ cents}=8\text{ cents}\]

The share price rose by 8 cents [1].

(b) Investors trading shares that have already been issued are using the secondary market, or stock market [1]. The firm does not receive the sale money from these trades because investors are selling to other investors.

(c) News of higher expected profit can increase demand for the firm’s shares, raising their market price [1]. Investors may expect higher future dividends or a more valuable business, so more wish to buy the available shares.

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