In a Firm Commitment,the Underwriter

question 31

Multiple Choice

In a firm commitment,the underwriter:

• A) encounters virtually no risk because the spread is fixed.
• B) is allowed to sell the shares at any price they choose.
• C) is protected against being stuck with unsold shares.
• D) is allowed to sell the shares at a price slightly higher than the price it paid to the company.

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Definitions:

Unilateral Contract

An agreement in which one party makes a promise in exchange for the other party's action but does not require a reciprocal promise to act.

Preexisting Duty Rule

A legal principle that states an existing duty cannot serve as consideration for a new contract, but modifications can occur if additional or new consideration is provided.

Unforeseen Circumstances

situations or events that were not predicted or expected and can significantly impact contracts or agreements.

Enforcing Contracts

The legal process of ensuring that parties to a contract fulfill their obligations as specified in the contract.