Chapter 20, Problem 4QP

Summary Introduction

To determine: The profit, the expected profit and the principle illustrated.

Initial Public Offering:

The initial public offering refers to the shares or the stock which are offered by a company to the public for the first time. This is done through following lots of regulations and is generally done to raise the funds of a company.

Under pricing:

The under pricing term refers to the offering of the stocks or the bond at a low price than before. The stocks or the debt are said to be underpriced when they are traded at a lower price than which were issued first for the trade.