Please kindly answer the 2 following questions: 3) Investment banks are legally

Question

Please kindly answer the 2 following questions:

3)

Investment banks are legally required to investigate and disclose all relevant information about an issuer before securities are sold to the public, or investment banks can be held legally responsible for investor losses that occur after the issue is sold. This is called __________.

Underwritten

Best-efforts basis

Competitive bidding

Due dilligence

4)

For small and start-up firms, which of the following is a popular channel to achieve capital financing?

Commercial banks

Mutual funds

Hedge funds

Venture capital

Underwritten

Best-efforts basis

Competitive bidding

Due dilligence

Explanation / Answer

Answer 3 Underwriting: Investment banks are legally required to investigate and disclose all relevant information about an issuer before securities are sold to the public, or investment banks can be held legally responsible for investor losses that occur after the issue is sold. This is called Underwriting. Apart from this underwriter also decides the minimum price of the securities. Securities cannot sell below the price decided by the underwriter.

Answer 4: For small and start-up firms, venture capital is the popular channel to achieve capital financing. This capital is also known as risk capital as the return on the capital is not guaranteed but sometimes returns on this capital is more than average return. The return totally depends on the performance of the business. Also, during the wind up venture capitalist is the last one to get paid. Venture capital proves angel capital for the startups.

Hope this helps

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