A dealer (market maker) earns compensation primarily through:

A dealer (market maker) earns compensation

Multiple choice — select the best answer

AA markup or markdown on principal trades
BA commission as agent
CManagement fees
DUnderwriting spreads only

✓ Correct answer: A. A markup or markdown on principal trades A dealer trades as principal from its own inventory and is compensated by the markup (when selling to a customer) or markdown (when buying from a customer). Brokers, by contrast, charge commissions.

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A dealer (market maker) earns compensation primarily through:

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