A publicly traded Toronto ﬁrm has decided to issue 1 million new shares of common stock at the current market price of $10 per share. An underwriting syndicate pays the ﬁrm $9.3 million for the
Entire issue and then markets the shares at $10 each. This is an example of a(n):

Question

Quizplus · Accepted Answer

This is an example of firm commitment underwriting, where the underwriters agree to purchase the entire issue from the firm and then sell the shares to the public at a set price. The underwriters assume the risk of any unsold shares.

A Publicly Traded Toronto ﬁRm Has Decided to Issue 1