Question

A _____ commitment underwriting is an arrangement where the underwriter pays the issuer a stated amount whether or not the underwriter can sell all of the shares in the issue to investors.

Answer 1

Best effort under writing

Step-by-step explanation:

In a best effort underwriting, the issuer agrees to pay a stated amount of its securities to the underwriter or the agent for the issuer and the public and also ensures to find the best investor. The issuer on the other promises to pay underwriter a certain amount as fee for providing help in this matter.

Both the issuer and the underwriter can agree to the condition of all or none or a certain minimum percentage underwriting.

This form of underwriting is suitable for small underwriters.