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Question
An investment banker agrees to underwrite an issue of 10 million shares of stock for TWResearch, Inc. on a firm commitment basis. The investment banker pays $10.50 per share to TWResearch, Inc. for the 10 million shares of stock. It then sells those shares to the public for $11.20 per share.
What is the profit (loss) to the investment banker?
A. Profit of $1,000,000.
B. Profit of $2,000,000.
C. Profit of $7,000,000.
D. Loss of $7,500,000.
E. Loss of $1,000,000.
Answer
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