______ 8. Assume the offer price for an IPOis set at $25 per share and the shares issued in the IPO is 10million. The lead underwriter, however, sells 11.5 million sharesto investors at the $25 offer price, planning to use theoverallotment option, if needed, to satisfy its short position.Assume that the IPO firm’s stock starts trading on the stockexchange at either $23 per share or $27 per share. In which ofthese two possible stock prices will the lead underwriter mostlikely exercise its overallotment option?
A. If the stock starts trading at $23per share.
B. If the stock starts trading at $27per share.
______ 1. The following are four dates thatare related to a firm’s regular quarterly cash dividend equal to $1per share. Assume you want to receive the $1 dividend, but youdon’t currently own the stock. What is the latest day that you canbuy the stock and still ensure that you will receive the $1dividend? (Assume all the days listed below and all the days givenin the possible answers are business days in which the stock marketis open.)
Declaration date | Ex-Date | Record Date | Payment Date |
Jan 31, 2018 (Wed) | Feb 14, 2018 (Wed) | Feb 15, 2018 (Thurs) | Feb 28, 2018 (Wed) |
______ 2. Assume a company pays a $2.5dividend. The stock’s price is $20 per share on the day before thestock’s ex-dividend day and $19 on the ex-dividend date. What isthe stock’s return for this one-day period?
