Question

All of the following statements about stand-by (firm commitment) underwriting are true EXCEPT: Select one: A....

All of the following statements about stand-by (firm commitment) underwriting are true EXCEPT: Select one: A. The investment banker guarantees the issuer a fixed amount of money from the share sale. B. The investment banker actually buys the shares from the company. 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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Answer #1

The correct answer is Option C

The underwriter is an agent or the investment bank hired by the company to manage all the transactions for the deal. They guarantees that the issuer receives a definite amount of money and they purchases the shares from the company and then sells them to the public. The underwriters also bears the risk if the resale price might be lower than the price than they pays not the issuers. So, Option C is True as this is the only exception.

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