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.

---

Definitions:

Demand

The quantity of a good or service that consumers are willing and able to purchase at various prices during a given period.

Income

The amount of money received by an individual or group over a certain period, often derived from work, investments, or business activities.

Utility Function

A mathematical formula that represents a consumer's preference ranking for various bundles of goods.

Budget Line

A graphical representation that shows all the possible combinations of two goods or services that can be purchased with a given budget, keeping the price of both goods constant.