Underwriting involves:.
a. issuing stock and using the proceeds to buy bonds.
b. guaranteeing a price for new capital to the issuing firm.
c. insuring the life or health of individuals.
d. selling stock more cheaply than conventional stockbrokers.

The correct answer is letter "B": guaranteeing a price for new capital to the issuing firm.

Explanation:

Underwriting means earning remuneration for the willingness to pay a potential contingent risk or incur it. Investment banking is the practice of investment bankers representing corporate and government entities in the Initial Public Offering (IPO) of their securities.

The investment banker is responsible for selling these securities to the public. There is a risk to investment bankers because they guarantee the issuers that the securities will be sold at no less than the minimum price set by the investment banker.

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