FroWhat would be the most likely fair value for Avantek that would make sense to both Goldman and Kidder around the time period $($say between $11$:$00$ and $11$:$59)$ when Greg was negotiating with Goldman and Kidder?

Hint: Each market maker$$s fair value is usually the mid$-$point of his bid and ask prices. There are multiple market makers$/$dealers for a stock on the OTC market. Goldman and Kidder are market makers. T$.$ Rowe Price is a normal trader.

Suppose a market maker believes the true value of a stock is $100.$ His bid and ask prices for the stock can be$,$ e$.$g$.,95$ and $105.$ Traders are going to trade with the market maker at either $95($sellers$)$ or $105($buyers$).$ Other traders in the market are going to see a sequence of transaction prices of$,$ for example, $95,105,95,105,105...$ with $95$ and $105$ randomly showing up on the computer screen. This is because buyers and sellers randomly arrive at the market and trade with the market maker. To find market maker$$s bid and ask, as well as the fair value, you need to examine the transaction price history during the time when T Rowe Price made the phone call. Such information is in the exhibits at the end of the case.

A$.$

$24$

B$.$

$231/2$

C$.$

$245/8$

D$.$

$246/8$m Harvard Case study $1147726$