Which of the following is true of the underwriting of IPOs performed by investment banks?

Question

Quizplus · Accepted Answer

The underwriting of IPOs by investment banks involves committing to buy stock from the issuing company at a fixed price, and then reselling the shares to the public at a higher price. This allows the issuing company to raise capital and the investment bank to make a profit on the underwriting. Options A, B, and D are incorrect. Investment banks are allowed to profit from the underwriting, they are responsible for reselling the purchased shares in the market, and they do not typically resell the underwritten stock in the market at a discounted price.

Which of the Following Is True of the Underwriting of IPOs