Question

A hospital revenue bond issue is being underwritten on a negotiated basis. The offering consists of $20,000,000 par value of term bonds. The underwriter has agreed to a spread of $30.00 for each $5,000 bond. The manager has set the additional takedown at $12.00 per bond and the selling concession at $15.00 per bond. If a selling group member sells a $5,000 par value bond directly to the public, the selling group member earns:

Answer 1

The selling group member earns $12 on that sale

Step-by-step explanation:

When selling a bond directly to the public, a group member earns a total takedown which is the total of the additional takedown plus the selling concession.

$12 + $15

= $27

Now if a selling group member finds a customer, then $15 which is the selling concession is given up leaving the member to earn $12 (the additional takedown) on that sale.