Why Does Underpricing Always Occur for an IPO

question 57

Multiple Choice

Why does underpricing always occur for an IPO?

• A)to guarantee sales by underwriters
• B)to discourage oversubscription from investors
• C)to reward customers by issuers
• D)to protect investors from deceptive firms

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Definitions:

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, evokes a conditioned response.

Neutral Stimulus

An object or event that initially produces no specific response other than focusing attention, until it is associated with a significant event.

Impending Occurrence

An event that is about to happen or is likely to happen shortly.

Unconditioned Stimulus

In classical conditioning, a stimulus that naturally and automatically triggers a response without needing to be learned.