Question

tamiami investment bank agrees to a firm commitment offering of 2.5 million shares of abc corporation stock. the offer price is set at $52.00 and the spread is 70 cents per share. if the stock is actually sold to the public at $56.00, what is the investment banker's gain or loss?

Answer 1

The investment banker's gain for the firm commitment offering can be calculated by subtracting the offering price and spread from the selling price. Therefore, the investment banker's gain is $3.30 per share.

Step-by-step explanation:

The investment banker's gain or loss can be calculated by taking into account the offering price, the spread, and the price at which the stock is sold to the public. In this case, the offering price is $52.00 and the spread is $0.70 per share. The stock is actually sold to the public at $56.00.

To calculate the gain or loss, we need to subtract the offering price and the spread from the selling price:

Gain or Loss = (Selling Price - Offering Price) - Spread

Gain or Loss = ($56.00 - $52.00) - $0.70

Gain or Loss = $4.00 - $0.70

= $3.30

Therefore, the investment banker's gain is $3.30 per share.