CFA Level I · CFA Level I Exam · Fixed-Income Markets for Corporate Issuers
Compared with a best-efforts offering, an underwritten offering of corporate bonds most likely:
An underwritten offering moves the risk of unsold bonds from the issuer to the investment bank. The bank buys the whole issue and resells it. In a best-efforts offering the bank merely tries to sell, so the issuer keeps the risk.
- Atransfers the risk of unsold bonds from the issuer to the investment bankCorrect
- Brequires the issuer to bear the risk of unsold bonds
- Cguarantees investors a minimum return on the bonds
Explanation
In an underwritten offering the investment bank buys the entire issue from the issuer and resells it, taking on the risk that bonds remain unsold. In a best-efforts offering the bank only tries to sell and the issuer bears that risk. No offering type guarantees investors a return.
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