Question

Select all that apply

Which of the following are explanations of underpricing?

Multiple select question.

Underpricing is a kind of insurance for the investment banks.


Underpricing is intentional theft from the issuing corporation.


Underpricing occurs because it primarily benefits the pre-issue shareholders


Underpricing occurs with smaller issues in order to attract investors.

Answers

GPT-4o mini
The explanations of underpricing that apply are:

- **Underpricing is a kind of insurance for the investment banks.**

- **Underpricing occurs with smaller issues in order to attract investors.**

While there may be arguments regarding the intentionality of underpricing or its effects on pre-issue shareholders, the first and last options provided are the most commonly accepted explanations within financial markets.

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