The Most Likely Reason That Underpricing of New Issues Occurs

question 85

Multiple Choice

The most likely reason that underpricing of new issues occurs more frequently than overpricing is that:

• A) underwriters desire to reduce the risk of a firm commitment.
• B) demand for a new issue is typically too high.
• C) underwriters earn low rates of return.
• D) issuing firms demand that equity be underpriced.

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Definitions:

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The ratio of deaths in a particular population, location, or group to the total population, typically expressed per thousand or hundred thousand.

Business Leaders

Individuals recognized for their vision, leadership, and ability to influence the direction and success of their organizations.

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Various situations or events that cause significant stress or danger, demanding immediate action to prevent or mitigate disaster.

Knowledge Management

The process of creating, sharing, using, and managing the knowledge and information of an organization.