Question

Company ABC would like to sell an additional 1000 shares using the Dutch Auction method. Using the table below, Bidder D will receive how many shares? Bidder Quantity Price A 500 $30 B 300 $28 C 100 $25 D 400 $20 E 300 $19 Select one: a. 520 shares b. 400 shares c. 378 shares d. 308 shares e. 290 shares

Answer 1

Bidder	Quantity	Price	Opening no. of Shares	Shares Allotted	Balance no. of Shares
A	500	$30	1,000	500	500
B	300	$28	500	300	200
C	100	$25	200	100	100
D	400	$20	100	100	-
E	300	$19	No shares allotted to E

Therefore, Bidder B will receive 100 shares.

Selling Price of all 1,000 shares will be $20 per share.

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Working:

• Investor A: 500 shares at $30 (1,000 – 500 = 500 shares remaining)
• Investor B: 300 shares at $28 (500 – 300 = 200 shares remaining)
• Investor C: 100 shares at $25 (200 – 100 = 100 shares remaining)
• Investor D: 100 shares at $20 (100 – 100 = 0 shares remaining)

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Note:

In Dutch Auction method , once all the bids are submitted, the allotted placement is assigned to the bidders from the highest bids down, until all of the allotted shares are assigned. However, the price that each bidder pays is based on the lowest price of all the allotted bidders, or essentially the last successful bid (in our case it is $20 per share)