Question

With a best-effort underwriting the compensation is based on:

a. the number of shares sold.
b. the investment banker does not bear the price risk associated with underwriting the issue.
c. the investment banking firm makes no guarantee to sell the securities at a particular price.
d. all of these.

Answer 1

d. all of these.

Step-by-step explanation:

Best-effort underwriting refers to the selling of shares or securities with best efforts involved. Generally it aims at maximum selling, the price is not in consideration, the number of shares sold is what matters.

Investment banks or underwriters do not care much about selling price as their commission is flat and fixed, irrespective of total revenue from sales.

Also there is no guarantee or agreement to sell specified number of securities, rather there is a promise to make best efforts for maximum sale.