Theorem Medical, is a biotechnology firm that is about to announce the results o

Question

Theorem Medical, is a biotechnology firm that is about to announce the results of its clinical trials of a potential new cancer drug. If the trials were successful, Theorem stock will be worth $65 per share. If the trials were unsuccessful, Theorem stock will be worth $15 per share. Suppose that the morning before the announcement is scheduled, Theorem shares are trading for S50 per share. Based on the current share price, what sort of expectations do investors seem to have about the success of the trials?

Explanation / Answer

Investors have a good opinion about the of succesful drug trial. This can be decided from the share price of $50. Share price is about 76.92% of the maximum expected share price. i.e. $65. Reason behind the price could be company might have good track record of inventing medicines and has good trust among investors about the company.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.