Why Does Underpricing Always Occur for an IPO

question 57

Multiple Choice

Why does underpricing always occur for an IPO?

• A)to guarantee sales by underwriters
• B)to discourage oversubscription from investors
• C)to reward customers by issuers
• D)to protect investors from deceptive firms

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Definitions:

Bank Failures

Occurrences where a bank is unable to meet its obligations to its depositors or other creditors because it has become insolvent or too illiquid to meet its liabilities.

Commercial Banks

Financial institutions that offer a wide range of services, including deposits, loans, and other financial products to businesses and individuals.

Incomes

Regular financial earnings obtained from labor services or investment gains.

U.S. Currency

The official monetary system of the United States, consisting of the dollar and its denominations.