What is your expected return on your ipo investments

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Reference no: EM131543317

You have an arrangement with your broker to request 1,050 shares of all available IPOs. Suppose that 8% of the time, the IPO is "very successful" and appreciates by 111% on the first day, 80% of the time it is "successful" and appreciates by 13%, and 12% of the time it "fails" and falls by 13%. a). By what amount does the average IPO appreciate the first day? b). Suppose you expect to receive 55 shares when the IPO is very successful, 240 shares when it is successful, and 1,050 shares when it fails. Assume the average IPO price is $12. What is your expected return on your IPO investments?

Reference no: EM131543317

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