The KelliMac Corporation is issuing new securities,and its investment bank has arranged to underwrite the issue.Under this arrangement,KelliMac's financial managers can count on raising a known amount of financial capital from the sale.

Question

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When an investment bank underwrites the issue of new securities, it guarantees that it will purchase the securities from the company and sell them to investors. This guarantees the company a known amount of financial capital from the sale of the securities.

The KelliMac Corporation Is Issuing New Securities,and Its Investment Bank