Question

# The Woods Co. and the Mickelson Co. have both announced IPOs at \$56 per share. One...

 The Woods Co. and the Mickelson Co. have both announced IPOs at \$56 per share. One of these is undervalued by \$8, and the other is overvalued by \$2, but you have no way of knowing which is which. You plan to buy 1,200 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled.
 If you could get 1,200 shares in Woods and 1,200 shares in Mickelson, what would your profit be?
 Profit ___________________\$
 What profit do you actually expect?
 Expected profit____________________ \$

Hi,

Profit = (1200*8)-(1200*2)

=\$7200

What profit do you expect in reality:

With rationing (and being an uninformed investor) we expect our profits = (600*8)-(1200*2)

=\$2400

#### Earn Coins

Coins can be redeemed for fabulous gifts.

Similar Homework Help Questions
• ### The Woods Co. and the Speith Co. have both announced IPOS at \$55 per share. One...

The Woods Co. and the Speith Co. have both announced IPOS at \$55 per share. One of these is undervalued by \$16, and the other is overvalued by \$5, but you have no way of knowing which is which. You plan to buy 2,300 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. a.If you could get 2,300 shares in Woods and 2,300 shares in Speith, what would...

• ### < Question 2 (of 14) 2. The Woods Co. and the Mickelson Co. have both announced...

< Question 2 (of 14) 2. The Woods Co. and the Mickelson Co. have both announced IPOs at \$46 per share. One of these is undervalued by \$13, and the other is overvalued by \$9, but you have no way of knowing which is which. You plan to buy 1,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. Assume you could get 1,000 shares in Woods and...

• ### value: 13.00 points P15-4 IPO Underpricing [LO3] The Woods Co. and the Mickelson Co. have both...

value: 13.00 points P15-4 IPO Underpricing [LO3] The Woods Co. and the Mickelson Co. have both announced IPOs at \$49 per share. One of these is undervalued by \$14, and the other is overvalued by \$6, but you have no way of knowing which is which. You plan to buy 1,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. Assume you could get 1,000 shares in Woods...

• ### The Speith Co. and the McIlroy Co. have both announced IPOs at \$50 per share. One...

The Speith Co. and the McIlroy Co. have both announced IPOs at \$50 per share. One of these is undervalued by \$9, and the other is overvalued by \$2, but you have no way of knowing which is which. You plan on buying 400 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. If you could get 400 shares in Speith and 400 shares in McIlroy, what would...

• ### Problem 15-4 IPO Underpricing [LO3] 7. The Woods Co. and the Speith Co. have both announced...

Problem 15-4 IPO Underpricing [LO3] 7. The Woods Co. and the Speith Co. have both announced IPOS at \$76 per share. One of these is undervalued by \$8, and the other is overvalued by \$3, but you have no way of knowing which is which. You plan to buy 1,300 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. a.lf you could get 1,300 shares in Woods and...

• ### The Speith Co. and the Reed Co. have both announced IPOs at \$62 per share. One...

The Speith Co. and the Reed Co. have both announced IPOs at \$62 per share. One of these is undervalued by \$14 and the other is overvalued by \$4, but you have no way of knowing which is which. You plan on buying 2,000 shares of each issue. If an issue is underpriced, it will be rationed and only half your order will be filled. If you could get 2,000 shares in Speith and 2,000 shares in Reed, what would...

• ### The Speith Co. and the Reed Co. have both announced IPOs at \$50 per share. One...

The Speith Co. and the Reed Co. have both announced IPOs at \$50 per share. One of these is undervalued by \$9 and the other is overvalued by \$2, but you have no way of knowing which is which. You plan on buying 400 shares of each issue. If an issue is underpriced, it will be rationed and only half your order will be filled. If you could get 400 shares in Speith and 400 shares in Reed, what would...

• ### The Spelth Co. and the Reed Co. have both announced IPOs at \$50 per share. One...

The Spelth Co. and the Reed Co. have both announced IPOs at \$50 per share. One of these Is undervalued by \$9 and the other is overvalued by \$2, but you have no way of knowing which is which. You plan on buying 400 shares of each issue. If an Issue is underpriced, It will be rationed and only half your order will be filled. If you could get 400 shares in Speith and 400 shares in Reed, what would...

• ### The Koepka Co. and the Johnson Co. both have announced IPOs at \$40 per share. One...

The Koepka Co. and the Johnson Co. both have announced IPOs at \$40 per share. One of these is undervalued by \$12.25, and the other is overvalued by \$5.50, but you have no way of knowing which is which. You plan on buying 1,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. a. If you could get 1,000 shares in Koepka and 1,000 shares in Johnson, what...

• ### The Koepka Co. and the Johnson Co. have both announced IPOs at \$59 per share. One...

The Koepka Co. and the Johnson Co. have both announced IPOs at \$59 per share. One of these is undervalued by \$18.50, and the other is overvalued by \$9.00, but you have no way of knowing which is which. You plan on buying 1,950 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. a. Assuming you could get 1,950 shares in Koepka and 1,950 shares in Johnson, what...