Question

In an underwritten arrangement, the investment banker assures the company that is issuing new securities that the entire issue will be sold, which means the investment banker bears significant risks in such an offering.True / False.

Answer 1

True

Step-by-step explanation:

Underwritten agreement is a contract between an underwriter and issue of shares.

The firm commitment contract is where the underwriter assures the issuer the shares will be sold at an agreed price. This is safest for the issuer as the underwriter bears the risk of selling all the shares.

Underwritten agreement states the price, settlement date, and initial resale price.