Isaac placed an order with his broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $24 a share.He received allocations of 300 shares of A,25 shares of B,and 250 shares of C.On their respective first days of trading Stock A closed at $20 a share,Stock B closed at $29 a share,and Stock C closed at $25 a share.How much less did he earn on his combined first day of trading than he would have had he received his full allocation of shares for all three stocks?

Question

Quizplus · Accepted Answer

To calculate the potential earnings if Isaac had received his full allocation of shares for all three stocks, we need to find the total amount he was supposed to purchase:

300 shares of A + 300 shares of B + 300 shares of C = 900 shares

Then, we multiply the total number of shares by the offer price per share:

900 shares * $24/share = $21,600

This is the amount Isaac would have spent to purchase his full allocation of shares.

Next, we need to calculate the total value of the shares he actually received on the first day of trading:

300 shares of A at $20/share = $6,000
25 shares of B at $29/share = $725
250 shares of C at $25/share = $6,250

Total value = $6,000 + $725 + $6,250 = $12,975

To find how much less Isaac earned, we need to subtract the total amount he would have spent from the total value of the shares he received:

$12,975 - $21,600 = -$8,625

This means that Isaac lost $8,625 by not receiving his full allocation of shares. To find how much less he earned, we need to take the negative value:

-$8,625 = -$1,425

Therefore, the answer is (D) -$1,425.

Isaac Placed an Order with His Broker to Purchase 300