When an investment bank buys new securities from a firm and takes on the responsibility of reselling those securities to the public it is engaged in ________.

Question

Quizplus · Accepted Answer

Underwriting is the process by which an investment bank purchases new securities from a firm and then sells them to the public. The investment bank takes on the responsibility of reselling the securities and assumes the risk if they are not able to sell them at a profit. Market manipulation and underpricing are both illegal activities that an investment bank should not engage in. The roadshow is a presentation given by the investment bank to potential investors to generate interest in the securities being offered.

When an Investment Bank Buys New Securities from a Firm