An Investment Banker Agrees to Underwrite an Issue of 5

question 72

Multiple Choice

An investment banker agrees to underwrite an issue of 5 million shares of stock for NetChoice, Inc. on a firm commitment basis. The investment banker pays $31.50 per share to NetChoice, Inc. for the 5 million shares of stock. It then sells those shares to the public for $30.00 per share. If the investment bank can sell the shares for $34 per share, what is the profit (loss) to the investment banker?

• A)Profit of $12,500,000.
• B)Profit of $10,000,000.
• C)Profit of $7,000,000.
• D)Loss of $7,500,000.
• E)Loss of $12,500,000.

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Definitions:

Dollar Amount

A numerical monetary value specified in units of currency, typically referring to the amount of money.

Repaid

Repaid pertains to the act of paying back money that was borrowed from an individual or institution.

Compound-Interest CSB

An interest calculation method, possibly referring to Canada Savings Bonds, where earned interest is added to the principal, and future interest calculations are based on the new total.

Redeemed

The act of repaying or buying back a security or loan, often before it matures.