Concession Questions

A municipality is issuing 40,000 bonds at a public offering price of $1,000. The manager of the underwriting syndicate receives $1.50 per bond. The total takedown is $6.50 per bond and the selling concession is $4.00 per bond. Assume the entire issue is sold with the selling group distributing 20,000 of the bonds sold. Calculate the amount of compensation the syndicate will receive for its risk on selling group sales.

$2.50 per bond for a total of $50,000

XYZ Corporation is selling 10,000,000 shares of common stock through an underwriter, at $15 per share. The underwriting spread is as follows. The manager's fee is 20 cents, the underwriting risk 20 cents, and the selling concession 60 cents. Selling group members have been allocated 500,000 shares. If the selling group members sell their entire allocation, their compensation will be:

$30,000

A municipality is issuing 40,000 bonds at a public offering price of $1,000. The manager of the underwriting syndicate receives $1.50 per bond. The total takedown is $6.50 per bond and the selling concession is $4.00 per bond. When the issue is completely sold, the managing underwriter's fee will total:

$60,000

.

.