Which One of the Following Statements Concerning IPOs and Underpricing

question 62

Multiple Choice

Which one of the following statements concerning IPOs and underpricing is correct?

• A)IPO underpricing primarily benefits a firm's pre-issue owners.
• B)IPO underpricing is a function of the underwriting spread.
• C)The more an issue is underpriced, the more it tends to be oversubscribed.
• D)Underpricing tends to discourage investors from participating in the IPO market.
• E)Undersubscribed shares generally tend to also be underpriced shares.

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Definitions:

Future Value

The estimated worth of an investment or amount of money at a specific future date, taking into account factors like interest rates or investment growth.

Annuity

A financial product that pays out a fixed stream of payments to an individual, typically used as part of a retirement strategy.

Concept

An abstract idea or a general notion that forms the foundation of a project, strategy, or theory.

Semiannual Payments

Payments made twice a year, often in the context of loan repayments or interest payments.