A)Underwriters Appear to Use the Information They Acquire During the Book-Building

question 6

Multiple Choice

A) Underwriters appear to use the information they acquire during the book-building stage to intentionally under price the IPO,thereby reducing their exposure to losses.
B) The blue tooth option allows the underwriter to issue more stock,amounting to 15% of the original offer size,at the IPO offer price.
C) The lead underwriter usually makes a market in the stock and assigns an analyst to cover it.
D) In most cases,the preexisting shareholders are subject to a 180-day lockup;they cannot sell their shares for 180 days after the IPO.Once the lockup period expires,they are free to sell their shares.
Answer: B
Explanation: B) The green shoe option allows the underwriter to issue more stock,amounting to 15% of the original offer size,at the IPO offer price.
Diff: 2
Section: 23.2 The Initial Public Offering
Skill: Conceptual
-Which of the following is NOT one of the four characteristics of IPOs that puzzle financial economists?

• A)On average,IPOs appear to be underpriced.
• B)The long-run performance of a newly public company (three to five years from the date of issue)is superior to the overall market return.
• C)The number of issues is highly cyclical.
• D)The costs of the IPO are very high,and it is unclear why firms willingly incur such high costs.

Understand the concept and implications of the production possibility frontier (PPF).

Grasp the impact of technological improvements and resources on production capabilities.

Recognize the significance of economic models and their role in analyzing real-world situations.

Acknowledge the advantages of trade between nations, even when one is more productive.

---

Definitions:

Psychological Support

Emotional or mental assistance provided to individuals dealing with stressful events, mental health issues, or life changes through various therapeutic techniques.

Psychosis

A mental health condition characterized by a disconnection from reality, manifesting through symptoms such as hallucinations and delusions.

Schizophrenia

A chronic brain disorder characterized by delusions, hallucinations, disorganized speech or behavior, and impaired cognitive ability.

Egas Moniz

A Portuguese neurologist known for pioneering the development of cerebral angiography and the controversial prefrontal leucotomy, which won him a Nobel Prize in Physiology or Medicine in 1949.