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Financial Market Management — CBSE Class 10 board question

Q1. [1]
In a book building issue, the issuer must specify either a price band or a floor price in the prospectus. The actual issue price can be any price within the specified price band or any price above the floor price. This determined issue price is known as
  1. (A) Cut-off price
  2. (B) Floor price
  3. (C) Ceiling price
  4. (D) Fixed price
Previously asked in CBSE board exam
2026 92 Q5 (ii)
Generated by claude-sonnet-4-6 · 2026-06-15 07:06 · grounding rag
Model Answer

(A) Cut-off price

In a book building issue, the actual discovered issue price — which can be within the price band or above the floor price — is called the Cut-off price. It is decided by the issuer and lead manager after considering the book and investors' appetite for the stock.

Source: Chapter 3, Section 3.1 — "What is Cut-Off Price?"

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Explanation

The passage explicitly defines Cut-off price as the discovered issue price in a book building process, which can be any price within the price band or above the floor price. Students often confuse it with floor price (minimum bid price) or ceiling/cap price (maximum of the band). Remember: floor price = minimum; ceiling = maximum; cut-off = final determined price after book building.

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