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The term underwriting spread refers to the:
A. Difference between the price the investment banker pays for a new security issue and the price at
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B. Commission a broker receives for either buying or selling a security on behalf of an investor.
C. Commission percentage an investment banker receives for underwriting a security lease.
D. Discount investment bankers receive on securities they purchase from the issuing company.
Answer: A
Explanation:
Choice "c" is correct. Investment bankers are paid their fees partly by being allowed to purchase the new
securities they are underwriting for a discount and then reselling those securities on the market. This is
known as the underwriting spread. Choices "a" and "d" are incorrect, as both of these describe either fees
or commissions and not an underwriting spread. Choice "b" is incorrect. The underwriting spread is the
difference between the discount price paid and the resale price.
NEW QUESTION: 2
A. Option B
B. Option C
C. Option A
D. Option D
Answer: B
NEW QUESTION: 3
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