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What are the differences between a competitive bid and a negotiated sale when selecting an underwriter?

What are the differences between a competitive bid and a negotiated sale when selecting an underwriter?

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Answer #1

The competitive and negotiated sale are different in this way :

A negotiated sale, is when the owner sells the security to a single underwriter at a negotiated price. In this method , the underwriters do not compete with each other and the owners do not make any comparative pricing.

In a competitive bid, the owner invites bids from several underwriters. Once all bids are submitted, the owner will select the lowest bid is then issued the security. This method allows for comparison between the prices and the lowest bidder is selected. The issuer chooses the favourable offer.

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