Each of the following situations describes an event that affected the stock market price of a par-ticular company. a. The price of a common share of McDonnell Douglas, Inc. , increased by over $5 per share in the several days after it was announced that Saudia Airlines would order $6 billion of com-mercial airliners from Boeing and McDonnell Douglas . b. Citicorp ’s common stock price fell by over $3.50 per share shortly after the Federal ReserveBoard increased the discount rate by 1⁄4 percent. The discount rate is the rate charged to banksfor short-term loans they need to meet their reserve requirements.c. The price of a common share of Ventitex, Inc., a manufacturer of medical devices, fell over $10 (27.7 percent) after it was announced that representatives of the Federal Drug Administra-tion paid a visit to the company. InstructionsFor each of the independent situations described, explain the likely underlying rationale for thechange in market price of the stock.
Each of the following situations describes an event that affected the stock market price of a par-
ticular company.
a. The price of a common share of McDonnell Douglas, Inc. , increased by over $5 per share in
the several days after it was announced that Saudia Airlines would order $6 billion of com-
mercial airliners from Boeing and McDonnell Douglas .
b. Citicorp ’s common stock price fell by over $3.50 per share shortly after the Federal Reserve
Board increased the discount rate by 1⁄4 percent. The discount rate is the rate charged to banks
for short-term loans they need to meet their reserve requirements.
c. The price of a common share of Ventitex, Inc., a manufacturer of medical devices, fell over
$10 (27.7 percent) after it was announced that representatives of the Federal Drug Administra-
tion paid a visit to the company.
Instructions
For each of the independent situations described, explain the likely underlying rationale for the
change in market price of the stock.
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