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:

Treasury Bills

Short-term government securities with maturities of one year or less.

Unadjusted Beta

A beta calculation that has not been modified to account for a company's specific volatility or the fiscal environment, reflecting the raw historical volatility of a stock.

Mean-Variance Efficient Portfolio

A portfolio that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Sensitivity Coefficients

Sensitivity coefficients measure the responsiveness of an asset's return to changes in underlying market factors or risks.