An Investment Banker Agrees to Underwrite an Issue of 5

question 33

Multiple Choice

An investment banker agrees to underwrite an issue of 5 million shares of stock for NetChoice, Inc. on a firm commitment basis. The investment banker pays $31.50 per share to NetChoice, Inc. for the 5 million shares of stock. It then sells those shares to the public for $30.00 per share.
-If the investment bank can sell the shares for $34 per share,what is the profit (loss) to the investment banker?

• A)Profit of $12,500,000.
• B)Profit of $10,000,000.
• C)Profit of $7,000,000.
• D)Loss of $7,500,000.

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Definitions:

Financial Data

Information related to the financial performance of an entity, including income, expenses, assets, and liabilities.

Annual Cost

The total amount of money required to operate or maintain something over the course of a year.

Financial Data

Quantitative information pertaining to financial transactions, including revenues, expenses, profitability, and market performance.

Lowest Profit

This refers to the minimum amount of financial gain realized from business operations, investments, or other revenue-generating activities during a specific period.