Which of the Following Is True of Underpricing

question 7

Multiple Choice

Which of the following is true of underpricing?

• A)Underpricing occurs when the offer price is above the first closing price.
• B)Underpricing occurs when the average daily return of the IPO is lower than the market return.
• C)Underpricing is measured as the average initial returns measured over the first trading day.
• D)Underpricing is measured as the percentage increase from the intrinsic value to the first closing price.

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Definitions:

NAV

Net Asset Value, the total value of all the securities in an investment portfolio minus any liabilities, divided by the number of shares outstanding.

Asset Growth

The increase in the value of a company's assets over time, which can be due to investment returns or contributions.

Debt Ratio

A financial ratio that measures the proportion of a company's total debt to its total assets, indicating the leverage level and financial health.

Mortgage-backed Securities

Investments secured by mortgages, which pay investors from the mortgage payments of homeowners.