An underwriter's usual practice involves selling the entire bond issue to customers on the secondary bond market.

An underwriter's usual practice involves selling the entire bond issue to customers on the secondary bond market.

• A. Not stated
• B. Not applicable
• C. True
• D. False

Answer: (C)

In underwriting, the key idea is how a new bond issue is brought to investors. The underwriter’s usual role is to sell the new issue in the primary market, typically by buying the entire issue from the issuer (in a firm-commitment deal) and then reselling it to investors at the offering price, earning a spread. The secondary market is where existing bonds trade among investors after issuance, not where the underwriter conducts the initial distribution. Therefore, stating that the underwriter’s usual practice involves selling the entire bond issue to customers on the secondary market would be incorrect—the normal practice is primary-market distribution.

In underwriting, the key idea is how a new bond issue is brought to investors. The underwriter’s usual role is to sell the new issue in the primary market, typically by buying the entire issue from the issuer (in a firm-commitment deal) and then reselling it to investors at the offering price, earning a spread. The secondary market is where existing bonds trade among investors after issuance, not where the underwriter conducts the initial distribution. Therefore, stating that the underwriter’s usual practice involves selling the entire bond issue to customers on the secondary market would be incorrect—the normal practice is primary-market distribution.