Amy's Accessories, Inc., needs to raise $10 million to finance plant expansion. In discussions with its investment bank, Amy's Accessories learns that the bankers recommend an offer price (or gross proceeds) of $25 per share and Amy's Accessories will receive $23 per share. What is the underwriter's spread on the issue?

Question

Quizplus · Accepted Answer

The underwriter's spread is the difference between what the investment bank pays the company per share ($23) and the offer price per share ($25), which is $2.