Question 14

"The Alpha Corp. and the Beta, Inc., have both announced IPOs priced at $20.00. Although you don't know this, the true value per share of Alpha is $22 and the true value per share of Beta is $18. You place an order for 1,000 shares of each IPO. The Beta IPO is undersubscribed and so all bidders are allocated all the shares they ordered. In contrast, the Alpha IPO is oversubscribed and so the bidders receive only half of the shares they ordered. Assuming the prices on the first day of trading are equal to the firms' true values, what is your first-day $ profit?"

		$0
		"-$1,500"
		"$1,500"
		"$2,000"
		"-$1,000"