Question

A retail salesperson has helped his firm win the role as the lead underwriter for a local μnicipal bond issue. If the underwriting is being conducted on a negotiated basis, which of the following statements is true?

a) The bond issue will be auctioned to the highest bidder.

b) The underwriting process will involve competitive bidding.

c) The lead underwriter is determined by a lottery system.

d) The underwriting terms are negotiated between the issuer and underwriter.

Answer 1

In a negotiated underwriting process, the underwriting terms are negotiated between the issuer and underwriter.

Step-by-step explanation:

If the underwriting process for a local municipal bond issue is being conducted on a negotiated basis, the correct statement is: d) The underwriting terms are negotiated between the issuer and underwriter.

In a negotiated underwriting process, the lead underwriter works directly with the issuer of the bonds to determine the terms of the underwriting. This involves negotiating the interest rate, maturity date, and other terms of the bond offering. The underwriter then sells the bonds to investors, based on the agreed-upon terms.