Future Business Leaders of America (FBLA) Securities and Investments Practice Test

How is the public offering price (POP) defined?

1. The price an investor pays for secondary market shares

2. The price for a mutual fund determined solely by its NAV

3. The price an investor pays for a mutual fund or an initial public offering

4. The predetermined price set by the issuer before the offering

The correct answer is: The price an investor pays for a mutual fund or an initial public offering

The public offering price (POP) refers to the price an investor pays for shares during an initial public offering (IPO) or a mutual fund. This price is established before the shares are made available to the public and represents the cost that investors incur to purchase these shares directly from the issuer. In the context of an IPO, the POP is determined through discussions between the underwriting investment bank and the issuer, taking into account market conditions, investor demand, and the financial health of the company going public. Additionally, for mutual funds, the POP is the price at which investors buy shares in the fund, which can be influenced by the net asset value (NAV) of the fund, as well as any applicable sales charges or load fees. This makes option C the most comprehensive and accurate description of the public offering price, covering both initial public offerings and mutual fund purchases.