In firm commitment underwriting, the underwriter's spread is
A)the bid ask spread in the secondary market.
B)the interest spread earned by the FI.
C)the difference between the underwriters' buy and sell price.
D)the difference between the offer price under a firm commitments as opposed to a best efforts underwriting contract.
E)the commission per share.

Question

Quizplus · Accepted Answer

The underwriter's spread refers to the difference between the price at which the underwriter purchases securities from the issuing firm and the price at which they sell them to the public. This spread represents the underwriter's compensation for the services they provide in the underwriting process, including assuming the risk of unsold securities. Therefore, Choice C, which states that the underwriter's spread is the difference between their buy and sell price, is the correct answer.

In Firm Commitment Underwriting, the Underwriter's Spread Is