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What is the average ipo? underpricing

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You have an arrangement with your broker to request 1,050 shares of all available IPOs. Suppose that 12% of the? time, the IPO is? "very successful" and appreciates by 115% on the first? day, 79% of the time it is? "successful" and appreciates by 14%?, and 9% of the time it? "fails" and falls by 16%.

a. By what amount does the average IPO appreciate the first? day; that? is, what is the average IPO? underpricing?

b. Suppose you expect to receive 55 shares when the IPO is very? successful, 200 shares when it is? successful, and 1,050 shares when it fails. Assume the average IPO price is $19. What is your expected? one-day return on your IPO? investments?

Reference no: EM132679391

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