Which of the Following Is NOT True Regarding Overallotment Options

question 48

Multiple Choice

Which of the following is NOT true regarding overallotment options?

• A)They are rarely used in IPOs.
• B)They allow the underwriter to allocate an additional 15 percent of the shares of the firm engaging in an IPO.
• C)They allow the underwriter to purchase additional shares at the IPO offer price.
• D)They can be used to help stabilize the stock price in the days after an IPO.

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Definitions:

Time Inconsistency

Describes a situation where a person's preferences change over time in such a way that what they prefer at one point in time is inconsistent with what they will prefer at another time.

Self-Control Problems

Refers to the difficulty individuals have in restraining their impulses or desires, often leading to challenges in decision-making that affect long-term goals.

Myopia

The lack of foresight or long-term planning, focusing only on the short-term gains or outcomes.

Present Concern

Current issues or worries that are relevant or impacting an individual or group at the moment.