Steve placed an order with his broker to purchase 500 shares ofeach of three IPO
ID: 2662435 • Letter: S
Question
Steve placed an order with his broker to purchase 500 shares ofeach of three IPOs that are being released this month. Each IPO hasan offer price of $20 a share. The number of shares allocated toSteve, along with the closing stock price at the end of the firstday of trading for each stock, are as follows:Stock Shares Allocated Closing Mkt. Price - Day 1 A 500 $18.80 B 100 $26.40 C 300 $19.70
What is Steve's total profit or loss on these three stocks asof the end of the first day of trading for each stock?
A. $817 B. - $249 C. - $50 D. - $125 E. $165
Stock Shares Allocated Closing Mkt. Price - Day 1 A 500 $18.80 B 100 $26.40 C 300 $19.70
What is Steve's total profit or loss on these three stocks asof the end of the first day of trading for each stock?
A. $817 B. - $249 C. - $50 D. - $125 E. $165
Explanation / Answer
Answer:
C. -$50 is the rightoption, let’s solve it!
Each individual share price of three different IPO is $20,
After one day trading,
500 shares were sold at the rate of $18.80:
($18.80 - $20 = -$1.2) = loss of $1.2 per share,
Loss on 500 shares = 500 * -$1.2 = -$600
100 shares were sold at the rate of $26.40:
($26.40 - $20 = $6.4) = profit of $6.4 per share,
Profit on 100 shares = 100 * $6.42 = $640
300 shares were sold at the rate of $18.80:
($19.70 - $20 = -$0.3) = loss of $0.3 per share,
Loss on 300 shares = 300 * -$0.3 = -$90
Total Profit/Loss = (-$600) + ($640) + (-$90)
Total Profit/Loss = -$50
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