The amount paid to an underwriter who participates in a standby underwriting agreement is called a(n):
A)gross spread.
B)optional spread.
C)standby fee.
D)additional fee.
E)oversubscription fee.

Question

Quizplus · Accepted Answer

The amount paid to an underwriter who participates in a standby underwriting agreement is known as a standby fee. This fee compensates the underwriter for agreeing to purchase any remaining securities within the issuance that are not bought by investors. The gross spread is the difference between the price paid by the underwriter and the price for which the securities are sold to the public. Optional and additional fees are not commonly used terms in underwriting. Oversubscription fees are charged to investors who request more shares of a security than are available.

The Amount Paid to an Underwriter Who Participates in a Standby