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A hospital revenue bond issue is being underwritten on a negotiated basis. The offering consists of $100,000,000 par value of term bonds. The underwriter has agreed to a spread of $50.00 for each $5,000 bond. The manager has set the additional takedown at $20.00 per bond and the selling concession at $22.00 per bond. If a selling group member sells a $5,000 par value bond, the syndicate member earns:

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Answer:

The syndicate member earns $20.

Explanation:

When bonds are sold directly to the public, the syndicate member earns the total takedown. Total takedown refers to the selling concession plus the additional takedown $22.00 + $20.00 = $42.00.

In this question, it indicated that a selling group was used to find customers. This means that the syndicate member will not earn the total takedown because he has given up his selling concession of $22.00 to the selling group member, leaving the syndicate member to earn only the additional takedown of $20.

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