The Offering Price Is Set to Make an Issue Attractive

question 55

Multiple Choice

The offering price is set to make an issue attractive to the market and provide a good price to the issuer.Which of the following is/are true?

• A)Empirical studies by Ritter have shown that the average firm commitments have had a 17.8% underpricing on the first day of trading.
• B)Empirical studies have shown that best efforts sales have underpricing on the first day of trading.
• C)Some issues which rose dramatically on the first day of trading were viewed as successfully priced by the underwriter because it helped build a long-term investment base.
• D)All of the above.
• E)None of the above.

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Definitions:

Dynamic Systems Theory

A theory that addresses how new, complex systems of behavior develop from the interaction of less complex parts.

Complex Systems

Systems composed of many components which may interact with each other in multiple ways, leading to emergent behavior that cannot be predicted from the behavior of the individual components.

Interaction

The reciprocal action or influence between entities, objects, or individuals, highlighting how they affect each other.

Information-Processing Theorists

Scholars who study how human beings process information, including the ways in which they perceive, analyze, manipulate, store, and retrieve information.