One reason that underpricing of new issues occurs more frequently than overpricing is that underwriters want to reduce the risk of a firm commitment. Therefore, Option A is correct.
<h3>What is
underwriting?</h3>
Some major financial institutions, including banks, insurance companies, and investment firms, offer underwriting services in which they guarantee payment in the event of damage or financial loss and accept the financial risk for liability resulting from such guarantee.
Therefore, One reason that underpricing of new issues occurs more frequently than overpricing is that underwriters want to reduce the risk of a firm commitment. Option A is correct.
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"Your question is incomplete, probably the complete question/missing part is:"
A. underwriters want to reduce the risk of a firm commitment.
B. the demand for a new issue is typically too high.
C. underwriters earn low rates of return.
D. issuing firms demand that equity be underpriced.
Demand for a product is perfectly elastic in this type of industry. Monopolistic competition occurs whereby the market is made up of many consumers and many producers and the product/service offered by the producers is differentiated. In this case, the producers are price makers as they posses significant pricing power. One key characteristic across the board is that since a similar range of products is being offered, demand is highly elastic and can easily shift based on small changes made by the producer.
Answer:
Consumer Price Index - Measuring the cost of living for a typical consumer.
The CPI is a measure of the change in price of a basket of goods and services most commonly bought by an average customer.
Producer Price Index - Examining price changes that might affect businesses.
The Producer Price Index measures the change in prices for raw materials that are used in the production process. This is an important price index to measure the costs associated with running a business in a specific area.
Home Price Index - Measuring differences in the cost of living between different cities.
The Home Price Index measures the changes in the price of residential units in different areas. This index is useful to measure the cost of living accross cities because the cost of renting and buying real estate is often the most significant cost of living for any city.
Health ,home owners ,and auto