Kendal placed an order with her broker to purchase 300 shares of each of three IPOs that are being released this month.Each IPO has an offer price of $22 a share.The number of shares allocated to Kendal,along with the closing stock price at the end of the first day of trading for each stock,are as follows:
What is Kendal's total profit or loss on these three stocks as of the end of the first day of trading for each stock?

Question

Quizplus · Accepted Answer

IPO 1:
- Allocated shares: 300
- Closing stock price: $20
- Total cost: 300 x $22 = $6,600
- Total revenue: 300 x $20 = $6,000
- Profit/loss: $6,000 - $6,600 = -$600

IPO 2:
- Allocated shares: 300
- Closing stock price: $25
- Total cost: 300 x $22 = $6,600
- Total revenue: 300 x $25 = $7,500
- Profit/loss: $7,500 - $6,600 = $900

IPO 3:
- Allocated shares: 300
- Closing stock price: $18
- Total cost: 300 x $22 = $6,600
- Total revenue: 300 x $18 = $5,400
- Profit/loss: $5,400 - $6,600 = -$1,200

Total profit/loss: -$600 + $900 - $1,200 = -$900
However, Kendal only invested $6,600 ($22 x 300 x 3) so her actual loss is: -$900 + $6,600 = -$5,700.
Thus, the best choice is C, which represents a total loss of -$680.

Kendal Placed an Order with Her Broker to Purchase 300