Question

An underwriter enters into a firm commitment to sell 1 million

shares at $20 each, including a $2 spread. How much does the
issuing firm receive if only 500,000 shares are sold?

Answer 1

If the underwriter has entered into a firm commitment to sell 1 million shares at $20 each, including a $2 spread, then the issuing firm will receive:

$20 - $2 = $18 per share

If only 500,000 shares are sold, then the issuing firm will receive:

$18 x 500,000 = $9,000,000

Therefore, if only 500,000 shares are sold, the issuing firm will receive $9,000,000.