An underwriter follows a best efforts basis to sell 2 million shares at $10 a piece. Such a public offering price has included a $1 spread. How much will the issuer receive if only 1.5 million shares are sold in this issue?
A) $20.0 million
B) $18.0 million
C) $15.0 million
D) $13.5 million

Question

Quizplus · Accepted Answer

The spread is the difference between the public offering price and the amount that the issuer will receive per share. In this case, the spread is $1. Therefore, the issuer will receive $9 per share sold. If only 1.5 million shares are sold, the total amount the issuer will receive is 1.5 million x $9 = $13.5 million. Therefore, the correct answer is D.

An Underwriter Follows a Best Efforts Basis to Sell 2