Wesfarmers needs to raise $720 million for an expansion and approaches an investment banker. If the issue is 480,000 bonds and it raises $840 million on a stand-by basis, what is the underwriter's per share compensation?

Question

Quizplus · Accepted Answer

The underwriter's compensation per bond is calculated by subtracting the amount raised ($720 million) from the stand-by amount ($840 million) and then dividing by the number of bonds (480,000). This results in ($840 million - $720 million) / 480,000 = $120 per bond.

Wesfarmers Needs to Raise $720 Million for an Expansion and Approaches