In return for their services in the primary securities market, investment banks earn a fee called a(n)
A) underwriting spread.
B) bid-asked spread.
C) dealer's spread.
D) broker's spread.

Question

Quizplus · Accepted Answer

Investment banks earn a fee called an underwriting spread for their services in the primary securities market. This fee is calculated as the difference between the price at which the securities are sold to the public and the price paid to the issuer of the securities. The underwriting spread compensates the investment bank for the risk it takes on in underwriting the securities, as well as for its services in marketing and distributing the securities to investors.

In Return for Their Services in the Primary Securities Market