Series 79 practice questioneasySyndicate and Selling Groups
What is the underwriting spread in an equity offering?
- AThe difference between the price paid by investors and the net amount received by the issuer✓ Correct answer
- BThe difference between the bid and ask in secondary trading only
- CThe difference between book and tax depreciation
- DThe spread between Treasury and corporate yields
Explanation
Why A — The difference between the price paid by investors and the net amount received by the issuer
The difference between the price paid by investors and the net amount received by the issuer The underwriting spread compensates the underwriting group for assuming risk and distributing the offering. It is typically divided into management fee, underwriting fee, and selling concession components.
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