Which of the Following Is NOT an Explanation Advanced for the Phenomenon

question 42

Multiple Choice

Which of the following is NOT an explanation advanced for the phenomenon of underpricing of an IPO?

• A)Providing the initial buyers with a capital gain in an effort to create goodwill.
• B)The desire of the seller in the primary market to achieve a successful float.
• C)The wish to raise smaller amounts of capital.
• D)Compensation for the risk accepted by buyers in IPOs, given that underpricing is not guaranteed.
• E)The superior negotiating power of the investment bank over the seller.

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