The underwriting spread on newly issued bonds is normally ____ that on newly issued stock.
A)less than
B)greater than
C)about the same as
D)less than (for newly issued preferred stock) but greater than (for newly issued common stock)

Question

Quizplus · Accepted Answer

The underwriting spread on newly issued bonds is usually less than that on newly issued stocks because bonds are less risky and have a fixed interest rate, making them easier to sell to investors. Conversely, stock prices can be volatile and the underwriters need to compensate for this risk by charging a higher underwriting spread.

The Underwriting Spread on Newly Issued Bonds Is Normally ____