Issue Costs for Equity Are Higher Than Those for Debt

question 107

Multiple Choice

Issue costs for equity are higher than those for debt for all of the following reasons except:

• A) equity issues have higher administrative costs.
• B) underwriting stock is riskier than underwriting bonds.
• C) equity issues involve significantly more time to sell.
• D) equity issues have lower economies of scale.

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Definitions:

Annual Percentage Rates (APRs)

A measure of the cost of credit, expressed as a yearly interest rate, that includes interest, fees, and other charges associated with the loan.

Compound Interest

Interest calculated on the initial principal which also includes all of the accumulated interest from previous periods on a deposit or loan.

Simple Interest

Interest calculated on the principal portion of a loan or deposit, without compounding over time.

Holding-Period Return

The overall return earned from owning an asset or a collection of assets over a specified duration, often represented as a percentage.