Hulkster Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows: Bidder A will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation.

Question

Hulkster Company would like to sell 700 shares of stock using the Dutch auction method.The bids received are as follows:  Bidder A will receive _____ shares and pay a price per share of ____.Bidder C will receive no allocation.

Quizplus · Accepted Answer

The Dutch auction method starts with a high asking price and lowers it until all shares are sold. From the bids received, the highest bid was $18, so that will be the clearing price. The shares will be allocated starting with the highest bidder who bid $18 and going down until all 700 shares are allocated. Bidder A bid $18 and is willing to purchase up to 400 shares, so they will receive all 400 of their requested shares. Bidder B bid $18 and is willing to purchase up to 200 shares, so they will receive all 200 of their requested shares. Bidder C bid $17 and is willing to purchase up to 100 shares, but there are no shares left to allocate to them. Therefore, the correct answer is D, which shows that Bidder A will receive 400 shares and pay $18 per share while Bidder B will receive 187 shares and pay $18 per share.

Hulkster Company Would Like to Sell 700 Shares of Stock