If the initial offer price for new securities is too high, the underwriters may
1) purchase the securities with their own funds
2) sell the securities at the offer price
3) let the price fall
A)1 and 2
B)1 and 3
C)2 and 3
D)1, 2, and 3

Question

If the initial offer price for new securities is too high, the underwriters may
1) purchase the securities with their own funds
2) sell the securities at the offer price
3) let the price fall
A)​1 and 2
B)​1 and 3
C)​2 and 3
D)​1, 2, and 3

Quizplus · Accepted Answer

If the initial offer price for new securities is too high, the underwriters may choose to purchase the securities with their own funds, but they are unlikely to sell them at the offer price as it is too high. Letting the price fall is a possibility as it allows the market to adjust and reach a more reasonable price, which may attract more buyers. Therefore, options 1 and 3 are the best choices.

If the Initial Offer Price for New Securities Is Too