Nermine placed an order with her broker to purchase 1,500 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $21 per share.The number of shares allocated to her along with the closing stock price at the end of the first day of trading for each stock, are as follows: What is her total profit or loss on these three stocks as of the end of the first day of trading for each stock?

Question

Nermine placed an order with her broker to purchase 1,500 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $21 per share.The number of shares allocated to her along with the closing stock price at the end of the first day of trading for each stock, are as follows:  What is her total profit or loss on these three stocks as of the end of the first day of trading for each stock?

Quizplus · Accepted Answer

Nermine purchased a total of 1,500 shares for each of the three IPOs, so she bought:

1,500 shares of IPO A at $21 per share = $31,500
1,500 shares of IPO B at $21 per share = $31,500
1,500 shares of IPO C at $21 per share = $31,500

The total cost of her purchases is: 
$31,500 + $31,500 + $31,500 = $94,500

At the end of the first day of trading, the closing stock price of each stock and the total value of her shares are:

IPO A: closing price of $24 per share, total value of $36,000
IPO B: closing price of $22 per share, total value of $33,000
IPO C: closing price of $27 per share, total value of $40,500

Her total portfolio value at the end of the first day of trading is: 
$36,000 + $33,000 + $40,500 = $109,500

Her total profit or loss is: 
$109,500 - $94,500 = $15,000

However, she also incurred the cost of purchasing the shares, which was $94,500.

So her total profit or loss is: 
$15,000 - $94,500 = -$79,500

This means her total loss is $79,500, which is equivalent to a loss of $5,145 for each of the 15,000 shares purchased. Therefore, the answer is C.

Nermine Placed an Order with Her Broker to Purchase 1,500