All of the Following About a Firm-Commitment Underwriting Is True

question 44

Multiple Choice

All of the following about a firm-commitment underwriting is true EXCEPT

• A) the investment banker guarantees the issuer a fixed amount of money from the stock sale.
• B) the investment banker actually buys the stock from the firm.
• C) the issuer bears the risk that the resale price might be lower than the price the underwriter pays.
• D) the underwriter bears the risk that the resale price might be lower than the price the underwriter pays.

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Definitions:

Denotative Meanings

The explicit or direct meanings of words or phrases in contrast to their connotative or associated meanings.

Metaphorical

Pertaining to or characterized by the use of a figure of speech in which a term or phrase is applied to something to which it is not literally applicable in order to suggest a resemblance.

Connotative

Pertaining to the implied or emotional meaning of a word, in contrast to its literal meaning.

Denotative

Relating to the explicit or direct meaning of a word or term, as opposed to its connotative (implied or associated) meanings.