The underwriter's spread is the highest for:
A) IPOs
B) Seasoned equity offerings
C) Convertible bonds
D) Straight bonds

Question

Quizplus · Accepted Answer

The underwriter's spread is typically the highest for IPOs because it involves greater risk and uncertainty for the underwriter. The underwriter bears the risk of not being able to sell all the shares at the offering price and may have to bear the cost of unsold shares. Therefore, the underwriter charges a higher fee for underwriting IPOs as compared to other offerings.

The Underwriter's Spread Is the Highest For