The situation in which the investment bank faces no risk of mispricing regarding security is considered as __________?
Correct answer: C. best efforts offering
- A. least good premium
- B. least good discount price
- C. best efforts offering
- D. least good index
Explanation
Under a best-efforts offering, the investment bank does not guarantee the sale of the securities, so it avoids the inventory and mispricing risk associated with a firm commitment. The issuer bears the risk that the issue will not sell fully.
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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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