The Green Shoe Option Is Most Apt to Be Exercised

question 7

Multiple Choice

The Green Shoe option is most apt to be exercised when an IPO is ________ and ________.

• A)underpriced;undersubscribed
• B)underpriced;oversubscribed
• C)correctly priced;neither over nor undersubscribed
• D)overpriced;oversubscribed
• E)overpriced;undersubscribed

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Definitions:

Positive Cash Flows

A situation where the cash inflows in a given period are greater than the cash outflows, indicating financial health.

Common Time Period

The standard duration used for comparing financial performance or investment returns across different assets or projects.

NPV Profile

A graphical representation depicting the relationship between the Net Present Value (NPV) and various discount rates.

Slopes Downward

In economics, describes a line on a graph that decreases in value as it moves from left to right, indicating a negative relationship between two variables.