When an investment bank raises investment capital from investors on the behalf of a corporation or government, it is said to ............... the issue
A) pawn
b)backstock
C)syndicate
D)underwrite
Answers
Answer :
When an investment bank raises investment capital from investors on behalf of a corporation or government, it is said to underwrite the issue.
Explanation :
When an investment bank raises investment capital from investors on behalf of a corporation or government, it is said to underwrite the issue. Underwriting is the process by which an investment bank acts as an intermediary between the issuer of securities, such as a corporation or government, and the investors who wish to purchase those securities. The investment bank evaluates the creditworthiness of the issuer and, if the issuer is deemed creditworthy, the bank will commit to purchase any unsold securities from the issuer at a predetermined price. This process is known as an underwriting agreement.
The investment bank will then market the securities to potential investors and will often use a network of other investment banks and financial institutions to help in the sale of the securities. This is known as a syndicate. The investment bank will also set a price for the securities and will make sure that the securities are sold to investors at that price. This is known as a backstock.
In this process, the investment bank acts as a gatekeeper, ensuring that the securities being sold to the public are of good quality and that the issuer is able to raise the necessary capital. This provides protection to the investors as it provides them with a guarantee that the securities will be sold at a certain price.
It's worth noting that "pawn" does not relate to this process as it relates to the act of depositing an item as collateral for a loan.
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