Which of the following is a key factor in bond underwriting?

The key factor in bond underwriting is capital. In the context of bond underwriting, capital refers to the financial resources and stability of the issuer and the underwriter. Underwriters need to assess whether there is sufficient capital backing the bond issue to meet the obligations to bondholders. This includes evaluating the issuer's creditworthiness, which is determined by its ability to make interest payments and repay the principal at maturity.

A strong capital position is essential because it reflects the issuer’s financial health and its capacity to handle future financial obligations. If capital is insufficient, the bond may be deemed higher risk, making it less attractive to investors, which can affect the pricing and success of the bond issue in the market.

Other factors such as liquidity, risk assessment, and market demand do play roles in the bond underwriting process, but they are often influenced by the underlying capital of the issuer. Liquidity pertains to how easily bonds can be bought or sold, risk assessment deals with evaluating the likelihood of default, and market demand relates to the investors' interest in purchasing the bonds; all these factors hinge on the issuer's capital situation. Thus, while all are important, capital stands out as the foundational factor in bond underwriting.