Shares in a Successful IPO Are Oversubscribed by a Factor

question 53

Essay

Shares in a successful IPO are oversubscribed by a factor of 4. Offerings are expected
either to appreciate by 20% or depreciate by 20% on the first day of trading. If half of
the offerings are oversubscribed, by what percentage do the shares of an IPO have to
be underpriced to keep you in the market, assuming fair rationing?

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