Underwriters are typically compensated for their services in helping a firm issue new securities in the form of a
A)commission.
B)set fee.
C)spread.
D)finder's fee.

Question

Quizplus · Accepted Answer

Underwriters are typically compensated through a spread, which is the difference between the price they pay for the securities from the issuing firm and the price at which they sell them to investors. This compensation structure incentivizes underwriters to sell the securities at as high a price as possible to maximize their own profit. Commission is a type of compensation structure where an individual or firm receives a percentage of the value of the securities they sell. A set fee or finder's fee are fixed compensation structures that do not take into account the price at which the securities are sold.

Underwriters Are Typically Compensated for Their Services in Helping a Firm