The issues sold by investment banks and guarantees the issuer by buying new issue at fixed price is classified as _________?
Correct answer: D. firm commitment underwritingGet Corporate Bonds
- A. index commitment underwriting
- B. insurance underwriting
- C. default risk underwriting
- D. firm commitment underwritingGet Corporate Bonds
Explanation
Under firm commitment underwriting, the investment bank buys the entire new issue at an agreed price and assumes the risk of reselling it. This guarantees proceeds to the issuing company.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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