Idle Time Gaming,Inc. ,has reached a point in its life where it needs several million dollars in order to expand and become the international company that it says it wants to be in its strategic plan.After consulting with an investment banker who is willing to underwrite the issue,it learned that investors will purchase the stock for $22/share.Idle time will receive a smaller amount for each share that is sold.

Question

Quizplus · Accepted Answer

This is a common characteristic of underwriting. The investment banker purchases the shares from the company at a lower price and resells them to investors at a higher price, allowing the company to raise the necessary funds for expansion.