Investment banking firms offer to facilitate the sale of securities to the public in a variety of ways.Which of the following methods guarantees the corporation with a pre-determined price for the securities?

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An underwriting is a process in which an investment banking firm guarantees a pre-determined price for the securities being sold by the corporation. The investment banking firm buys the securities from the corporation at a discounted price, and then sells them to the public at a higher price, thus earning a profit. This guarantees the corporation a fixed amount of money for the securities being sold rather than leaving it to chance on the open market. A best efforts basis is when the investment banking firm agrees to use their best efforts to sell the securities, but does not guarantee a pre-determined price. A commission basis is when the investment banking firm earns a commission on the sale of securities, but does not guarantee a pre-determined price. A competitive bid is a process in which multiple investment banking firms bid on the opportunity to underwrite the securities, but is not a method that guarantees a pre-determined price.

Investment Banking Firms Offer to Facilitate the Sale of Securities