Having heard about IPO underpricing, I put in an order to my broker for 1,110 shares of every IPO he can get for me. After 3 months, my investment record is as follows:   IPO Shares Allocated to Me Price per Share Initial Return A   610   $ 12     7 % B   310     20     13   C   1,110     10   − 2   D   0     14     20     a. What is the average underpricing in dollars of this sample of IPOs? (Do not round intermediate calculations. Round your answer to 2 decimal places.)   b. What is the average initial return on my “portfolio” of shares purchased from the four IPOs that I bid on? When calculating this average initial return, remember to weight by the amount of money invested in each issue. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

Having heard about IPO underpricing, I put in an order to my broker for 1,110 shares of every IPO he can get for me. After 3 months, my investment record is as follows:
 

IPO Shares Allocated
to Me
Price per Share Initial Return
A   610   $ 12     7 %
B   310     20     13  
C   1,110     10   2  
D   0     14     20  
 


a. What is the average underpricing in dollars of this sample of IPOs? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

 



b. What is the average initial return on my “portfolio” of shares purchased from the four IPOs that I bid on? When calculating this average initial return, remember to weight by the amount of money invested in each issue. (Do not round intermediate calculations. Enter your answer as a percent rounded to 1 decimal place.)

 
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 2 images

Blurred answer
Knowledge Booster
Stock repurchase
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education