Answer:
Answers are stated below
Step-by-step explanation:
a. According to the information of the exercise:
Profit = shares * undervalued value - Shares * Overvalued
Profit = 1,000($12.25) – 1,000($5.50) = $6,750
b. Expected profit = 500($12.25) – 1,000($5.50) = $625
c. Winner’s curse