What Is the Impact of Underpricing a Securities Issue

question 87

Multiple Choice

What is the impact of underpricing a securities issue?

• A)The underwriter loses while the issuing firm gains.
• B)Both the underwriter and the outside investor gains while the issuing firm loses.
• C)The outside investor loses while the issuing firm gains.
• D)Both the underwriter and the outside investor loses while the issuing firm gains.

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Definitions:

Obligations

Duties or commitments that individuals or organizations are legally bound to fulfill, such as contractual agreements or debt repayment.

Existing Partnership

An existing partnership refers to a business partnership that is currently in operation, implying a previously established legal agreement between two or more parties to conduct business together.

Dissolution

The process of officially ending the existence of a legal entity such as a corporation or partnership.

Authority of a Partner

The power granted to a partner in a partnership to act on behalf of the partnership and legally bind the business in contracts and agreements.