Under the _______ method,the underwriter buys the securities for less than the offering price and accepts the risk of not selling the issue,while under the _______ method,the underwriter does not purchase the shares but merely acts as an agent.

Question

Quizplus · Accepted Answer

In a firm commitment underwriting, the underwriter guarantees to buy the entire issue at a set price, and then resells it to the public. The underwriter assumes the risk of not being able to sell the securities at a profit. In a best efforts underwriting, the underwriter does not commit to buying the securities but instead agrees to use their best efforts to sell the securities at the best possible price. If they cannot sell all the securities, they return the unsold securities to the issuer. Therefore, the first blank is filled with the best efforts method, and the second blank is filled with the firm commitment method.

Under the _______ Method,the Underwriter Buys the Securities for Less