Question

Price (S) 5.00 5.25 5.50 5.75 6.00 6.25 6.50 Number of Shares Bid 600,000 700,000 850,000 800,000 650,000 400,000 150,000 Felicity Industries is selling 2 million shares of stock in an auction IPO. At the end of the bidding period they have received the bids shown above. Which of the following is closest to the price at which the shares will be offered? O A. $5.75 OB. $5.25 O C. S5.00 D. S6.00 O E. S6.25

Answer 1

Solution:
No of Shares sold in IPO auction	2 Million shares i.e 20,00,000
Price at which Shares will be offered would be price at which cummalative No of shares Bid would Sum to 20,000,000 Shares:
Cummalative no of shares starting with the highest bid amount.
150,000 Shares+400,000 Shares+650,000 Shares+800,000 Shares = 20,000,000 Shares
Price at which cummalative bid comes to 20,000,000 shares i.e Price of 800,000 shares is $5.75
Answer is A) $5.75