You have an arrangement with your broker to request 1,000 shares of all available IPOs. Suppose that 10% of the time, the IPO is "very successful" and appreciates by 100% on the first day, 80% of the time it is "successful" and appreciates by 10%, and 10% of the time it "fails" and falls by 15%.

a). By what amount does the average IPO appreciate the first day? (I believe it is (16.5%)

b). Suppose you expect to receive 50 shares when the IPO is very successful, 200 shares when it is successful, and 1,000 shares when it fails. Assume the average IPO price is $15. What is your expected return on your IPO investments?