Which of the Following Is NOT True About IPOs

question 89

Multiple Choice

Which of the following is NOT true about IPOs?

• A)They are good deals for investors who buy them at a public offering and then sell them quickly afterward.
• B)They have average first-day returns of 40% in the U.S.
• C)They are initially underpriced in every country where stocks are publicly traded.
• D)After the first day of trading, they usually underperform the market for several years.

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Definitions:

Conversion Value

The monetary worth at which a convertible security (like convertible bonds) can be converted into a specified number of shares of common stock.

Call Price

The specified price at which a callable bond can be redeemed by the issuer before its maturity.

Mortgage-Backed Security Tranches

Portions of a mortgage-backed security segregated by risk, payment timing, or other characteristics to suit different investors.

Default Risk Exposure

The likelihood that a borrower will be unable to make required payments on their debt obligations.