16. The process of underwriting a stock or bond issue requires that the investme

Question

16. The process of underwriting a stock or bond issue requires that the investment bank: CIRCLE ALL THAT APPLY (5 pts) Assure investors that the issue will provide them with a high return Purchase the entire issue at a predetermined price if the quantity demanded by consumers is insufficient at that predetermined price Purchase the entire issue at a predetermined price and then attempt to resell it in the market Purchase the entire issue at a predetermined price either as the sole underwriter or as a member of an underwriting syndicate a. b. c. d.

Explanation / Answer

Underwriting is a kind of process taken by investment banks to cover the risks of the company. In this they agree to buy the shares or bond at a minimum price if it did not subscribe fully. They will bear the cost of it or even resell it at lower price and bear the risk. So it is kind of purchasing at predetermined price and then resell it in the market.

Therefore , the answer is option 'c'

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