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 underwriter's buy and sell price.
D)the difference between the offer price under a firm commitments as opposed to a best efforts underwriting contract.

Question

Quizplus · Accepted Answer

The underwriter's spread in firm commitment underwriting is the difference between the underwriter's buy and sell price. This represents the compensation earned by the underwriter for assuming the risk of purchasing the entire issue from the issuer and then reselling it to investors.

In Firm Commitment Underwriting,the Underwriter's Spread Is