Question

10. Underwriting commission is calculated on …………….

a. Issue price of share underwritten

b. Net Liability Value

c. Marked application value

d. Firm Underwriting Value

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Answer 1

Answer:

A. Issue price of share underwritten.

Explanation:

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Answer 2

It is calculated on the Issue price of share underwritten

• An underwriter can be an individual, a corporation, or a partnership.
• When a corporation enters into a contract with under-writers, they agree to accept all or part of the shares or debentures offered that the general public is unable to subscribe to.
• An established corporation usually has an arrangement with an underwriter to pick up shares/debentures that it has issued to the public but that have not been fully subscribed by the public.
• The commission should always be based on the guaranteed issue price of the shares.