Question : What is the primary role of an underwriter in the capital market?
Option 1: Buying and selling securities on behalf of investors
Option 2: Facilitating the trading of government bonds
Option 3: Assisting companies in issuing securities
Option 4: Regulating the stock exchanges
Correct Answer: Assisting companies in issuing securities
Solution : The correct answer is (c) Assisting companies in issuing securities.
The primary role of an underwriter in the capital market is to assist companies in issuing securities. When a company wants to issue new securities, such as stocks or bonds, it may engage the services of an underwriter. The underwriter acts as an intermediary between the company issuing the securities and potential investors. The underwriter helps the company determine the optimal pricing and structure for the securities being offered. They assess market conditions, investor demand, and other factors to determine the appropriate terms of the securities issuance. This includes determining the offering price, the number of securities to be issued, and the timing of the issuance.The underwriter plays a crucial role in the capital market by facilitating the smooth and efficient issuance of securities, helping companies raise capital, and ensuring that investors have access to investment opportunities.
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