Simple English definitions for legal terms
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Spread is a term used in finance and investment banking. It refers to the difference between two prices. In banking, it is the difference between the interest rate a bank pays to attract deposits and the rate at which it lends money. In securities, it is the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to sell. Spread can also refer to the simultaneous buying and selling of options or futures contracts to profit from price differences. In investment banking, spread is the difference between the price an underwriter pays the issuer of a security and the price paid by the public in the initial offering. This spread compensates the underwriter for its services and includes the manager's fee, underwriter's discount, and selling-group concession or discount.
Definition: Spread refers to the difference between two prices or rates. It can be used in various contexts such as banking, securities, and investment banking.
In banking, spread refers to the difference between the interest rate that a financial institution pays to attract deposits and the rate at which they lend money. For example, if a bank pays 2% interest on deposits and charges 5% interest on loans, the spread is 3%.
In securities, spread refers to the difference between the highest price a buyer is willing to pay for a security (the bid price) and the lowest price at which a seller is willing to sell a security (the asked price). For example, if the bid price for a stock is $50 and the asked price is $52, the spread is $2.
Another example of spread in securities is when an investor simultaneously buys and sells one or more options or futures contracts on the same security to profit from the price difference.
In investment banking, spread refers to the difference between the price the underwriter pays the issuer of the security and the price paid by the public in the initial offering. This spread compensates the underwriter for its services and is made up of the manager's fee, the underwriter's discount, and the selling-group concession or discount.
Spread is a term used to describe the difference between two prices or rates. In banking, it refers to the difference between the interest rate paid on deposits and the rate charged on loans. In securities, it refers to the difference between the bid and asked price of a security or the profit made from buying and selling options or futures contracts. In investment banking, it refers to the difference between the price paid by the underwriter and the price paid by the public in the initial offering.