A customer buying a new municipal bond from a syndicate member pays the:
A. ask price, plus a commission
B. public offering price, plus a commission
C. public offering price, plus a reasonable markup
D. public offering price
What the above question is pointing out is that a primary offering of securities has one price called the "public offering price," or "POP." Built into that POP is the compensation to the underwriters and selling agents. This is true whether we're talking about municipal securities, corporate securities, mutual funds, or variable annuities. When securities are traded among investors in the secondary market, broker-dealers step in between and either make commissions or markups-markdowns. But when they act as underwriters on the primary market, their compensation is built into the POP.