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, the syndicate member earns:
A. $0
B. $12.00
C. $15.00
D. $27.00

Answer 1

Answer: B. $12.00

Explanation:

Normally the syndicate member is to earn both the additional takedown amount as well as the selling concession should they find the customers.

If a selling group finds the customers however as was the case here, the syndicate member will only earn the additional takedown amount of $12 per bond.