Underwriting spreads on equity issues are much __________ than on debt issues because stock prices are so __________ relative to bond prices.
A) smaller; steady
B) smaller; volatile
C) larger; steady
D) larger; volatile

Question

Quizplus · Accepted Answer

Underwriting spreads on equity issues are larger than on debt issues because the pricing and sale of equity (stocks) involve greater risk and volatility compared to debt (bonds), which are generally more stable. This increased risk and volatility in stock prices necessitate higher compensation for underwriters.

Underwriting Spreads on Equity Issues Are Much __________ Than on Debt