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What is meant by 'underwriting' a term, frequently used in the financial sector?
- a)The act of taking on a risk for a fee
- b)Under valuation of the assets
- c)Giving a guarantee that a loan will not become a bad loan
- d)The act of permission to float an IPO
- e)None of these
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
What is meant by 'underwriting' a term, frequently used in the financ...
Underwriting in the financial sector refers to the process of taking on a risk for a fee. It is commonly used in the context of insurance, loans, and investments.
Benefits of Underwriting:
- **Risk Management**: Underwriting helps financial institutions manage risk by assessing the potential risks associated with a particular asset or investment.
- **Fee Generation**: Underwriters charge a fee for assuming the risk, which helps generate revenue for the financial institution.
- **Market Confidence**: Underwriting provides a level of assurance to investors and lenders, increasing confidence in the financial product or service.
- **Compliance**: Underwriting ensures that financial products comply with regulatory requirements and industry standards.
Process of Underwriting:
- **Assessment**: Underwriters evaluate the risk associated with the asset or investment based on various factors such as financial performance, market conditions, and regulatory requirements.
- **Pricing**: Underwriters determine the appropriate fee or premium to compensate for the risk they are taking on.
- **Decision Making**: Based on the assessment, underwriters decide whether to accept or reject the risk.
- **Documentation**: Underwriters document the terms of the underwriting agreement, outlining the responsibilities and obligations of both parties.
Overall, underwriting plays a crucial role in the financial sector by facilitating the transfer of risk, ensuring compliance, and generating revenue for financial institutions.
Benefits of Underwriting:
- **Risk Management**: Underwriting helps financial institutions manage risk by assessing the potential risks associated with a particular asset or investment.
- **Fee Generation**: Underwriters charge a fee for assuming the risk, which helps generate revenue for the financial institution.
- **Market Confidence**: Underwriting provides a level of assurance to investors and lenders, increasing confidence in the financial product or service.
- **Compliance**: Underwriting ensures that financial products comply with regulatory requirements and industry standards.
Process of Underwriting:
- **Assessment**: Underwriters evaluate the risk associated with the asset or investment based on various factors such as financial performance, market conditions, and regulatory requirements.
- **Pricing**: Underwriters determine the appropriate fee or premium to compensate for the risk they are taking on.
- **Decision Making**: Based on the assessment, underwriters decide whether to accept or reject the risk.
- **Documentation**: Underwriters document the terms of the underwriting agreement, outlining the responsibilities and obligations of both parties.
Overall, underwriting plays a crucial role in the financial sector by facilitating the transfer of risk, ensuring compliance, and generating revenue for financial institutions.
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What is meant by 'underwriting' a term, frequently used in the financ...
'Underwriting' is one of the most important functions in the financial world, wherein an individual or an institution undertakes the risk associated with a venture, an investment, or a loan in lieu of a premium. Underwriters are found in banking, insurance, and stock markets.
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What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer?
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What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer? for Banking Exams 2025 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Banking Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer?.
What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer? for Banking Exams 2025 is part of Banking Exams preparation. The Question and answers have been prepared according to the Banking Exams exam syllabus. Information about What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for Banking Exams 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for What is meant by 'underwriting' a term, frequently used in the financial sector?a)The act of taking on a risk for a feeb)Under valuation of the assetsc)Giving a guarantee that a loan will not become a bad loand)The act of permission to float an IPOe)None of theseCorrect answer is option 'A'. Can you explain this answer?.
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