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Firm has hired Underwriter to underwrite their IPO. Underwriter and Firm agree to a Firm commitment IPO and to issue 500 million shares at $20
Firm has hired Underwriter to underwrite their IPO. Underwriter and Firm agree to a Firm commitment IPO and to issue 500 million shares at $20 per share. Firm agrees to pay a 6.65% spread to Underwriter. The market is less than enthusiastic about the issue and the Underwriter is forced to lower the price and the entire 500 million issue is sold at an average price of $17.50 per share. What was the profit (loss) of the Underwriter during the issue? O $585 million loss O $80 million loss $585 million gain $80 million gain
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