The most likely reason that underpricing of new issues occurs more frequently than overpricing is the:

The most likely reason that underpricing of new issues occurs more frequently than overpricing is the:



A) Underwriters' desire to reduce the risk of a firm commitment.
B) Demand for a new issue is typically too high.
C) Underwriters earn low rates of return
D) Issuing firms demand that equity be underpriced.




Answer: A


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