In a Market Where the Seller Has More Information Than

question 125

Multiple Choice

In a market where the seller has more information than the buyer,

• A)the seller can never gain by increasing the buyer's information.
• B)both the buyer and seller can gain by increasing the buyer's information.
• C)the buyer can never gain from increasing the seller's information.
• D)the buyer can only gain from additional information if it is costless.

---

Definitions:

Seasoned Equity Offering (SEO)

Refers to a new equity issue of shares by a company after its initial public offering (IPO) to raise additional capital.

Standby Underwriting Agreement

An arrangement where an underwriter agrees to buy any unsold shares after a public offering to ensure the issuing company raises the full amount of capital.

Underwriter's Buying Price

The price at which an underwriter agrees to buy securities from the issuer to subsequently sell them to the public, usually at a higher price.

Spread

The difference between the buying price and selling price of a financial instrument, or between the bid and ask prices.