When a firm selects an underwriter for an initial public offering, they must choose between a firm commitment and best efforts arrangement. Which of the below choices concerning these two arrangements is correct?

Attempt $1/3$ for $10$ pts$.$

Part$1$

In a best efforts arrangement, the underwriter guarantees that all of the shares will be sold to investors.

In a firm commitment, the underwriter purchases all of the new shares from the issuer and then re$-$sells them to investors.

In a firm commitment, the issuer sells the shares directly to investors without using an underwriter.

In a best efforts arrangement, the issuer does not register the new shares with the Securities and Exchange Commission.

In a best efforts arrangement, the issuer$$s financial statements are not audited before the IPO.