A. The underwriting spread is the difference between the price the investment banker pays for a new security issue and the price at which the investment banker then sells the securities to the public. This is the profit that is earned by the underwriter on the transaction
B. The underwriting spread is not a commission that the underwriter receives from the investor. See the correct answer for a complete explanation.
C. The underwriting spread is not a commission that is received by the underwriter. Commissions are based on the selling price, and the underwriting spread is not a percentage of the selling price.
D. While the underwriting spread is somewhat similar to a discount, it is not a discounted price, but rather the difference between what the underwriter pays for the securities and sell the securities for.
