Richard placed an order for 1,000 shares in each of three IPOs at $28 a share. He was allocated 1,000 shares of IPO A, 200 shares of IPO B, and 600 shares of IPO C. On the first day of trading, IPO A opened at $28 a share and ended the day at $24.25 a share. IPO B opened at $30 a share and finished the day at $37 a share. IPO C opened at $28 a share and ended the day at $27.65 a share. What is the total profit or loss on these three IPO purchases as of the end of the first day of trading?

Question

Quizplus · Accepted Answer

For IPO A, Richard had no gain or loss at the opening because it opened at the purchase price ($28), but by the end of the day, it had dropped to $24.25, resulting in a loss of $3.75 per share. For 1,000 shares, this is a total loss of $3,750.For IPO B, Richard was allocated 200 shares. It opened at $30 and ended at $37, a gain of $7 per share. For 200 shares, this is a total gain of $1,400.For IPO C, Richard was allocated 600 shares. It opened at $28 and ended at $27.65, a loss of $0.35 per share. For 600 shares, this is a total loss of $210.The total profit or loss is the sum of these amounts: -$3,750 (IPO A) + $1,400 (IPO B) - $210 (IPO C) = -$2,560.However, there seems to be a mistake in my calculation as none of the options match the result. Let's correct the calculation based on the given options and the correct approach:For IPO A: Loss = $(28 - 24.25) * 1,000 = $3,750 lossFor IPO B: Profit = $(37 - 30) * 200 = $1,400 profitFor IPO C: Loss = $(28 - 27.65) * 600 = $210 lossCorrect total = -$3,750 (loss from A) + $1,400 (profit from B) - $210 (loss from C) = -$2,560Given the options, it seems I've made an error in my initial explanation. Let's correctly calculate the total profit or loss:For IPO A: 1,000 shares * ($24.25 - $28) = -$3,750For IPO B: 200 shares * ($37 - $28) = $1,800For IPO C: 600 shares * ($27.65 - $28) = -$210Total profit or loss = -$3,750 + $1,800 - $210 = -$2,160The correct choice is A, indicating a total loss of $2,160.

Richard Placed an Order for 1,000 Shares in Each of Three