You Are a Broker and Have Been Instructed to Place

question 68

Multiple Choice

You are a broker and have been instructed to place an order for a client to purchase 500 shares of every IPO that comes to market.The next two IPOs are each priced at $25 a share and will begin trading on the same day.The client is allocated 500 shares of IPO A and 100 shares of IPO B.At the end of the first day of trading,IPO A was selling for $23.50 a share and IPO B was selling for $29 a share.What is the client's total profit or loss on these two IPOs as of the end of the first day of trading?

• A) -$425
• B) -$350
• C) $525
• D) $975
• E) $1,150

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Definitions:

Available-For-Sale Security

A financial asset that is neither classified as held-to-maturity nor held for trading, and the investor intends to sell if needed before its maturity or holding period ends.

Perfectly Matched Hedge

A hedging strategy that entirely eliminates the risk of a particular position by taking an offsetting position in the market.

Interest Rate Swap

A financial derivative contract in which two parties agree to exchange future interest rate payments, typically one fixed-rate and one variable-rate.

Fair Value

A financial term referring to the estimated market value of an asset, based on current market prices.