Global Filter Corp. and Stake Technology Inc. have both announced IPOs at $50 per share. One of these is undervalued by $7, and the other is overvalued by $5, but you have no way of knowing which is which. You plan on buying 10,000 shares of each issue. If an issue is underpriced, it will be rationed, and only half your order will be filled. If you could get 10,000 shares in Global Filter Corp. and 10,000 shares in Stake Technology Inc.,
a) What would your profit be?
Profit = $
b) What profit do you actually expect?
Expected profit = $