An investment banker most commonly makes money from
A) commissions from buyers.
B) fees from other investment bankers in the syndicate.
C) the spread between the issue price and proceeds to the issuer.
D) artificially supporting the stock price during and after the offering.

Question

Quizplus · Accepted Answer

An investment banker typically earns money by charging a fee, which is the difference between the issue price (the price at which the securities are sold) and the proceeds to the issuer (the amount of money received by the issuer). This fee is called the underwriting spread or gross spread, and it compensates the investment banker for the risk involved in underwriting the securities. Commissions from buyers and artificially supporting the stock price are not legitimate ways for investment bankers to make money, and fees from other investment bankers in the syndicate are simply a reallocation of the overall fee.

An Investment Banker Most Commonly Makes Money from