Which of the Following Statements Is MOST Correct Concerning Flotation

question 30

Multiple Choice

Which of the following statements is MOST correct concerning flotation costs?

• A) Flotation costs are the same for common stock, preferred stock and bonds because they reflect mainly printing costs and legal fees.
• B) Flotation costs are generally higher for bonds rather than stocks because the dollar amounts involved are much higher, allowing for economies of scale.
• C) Flotation costs as a percentage of gross proceeds increase as the size of the security issue increases.
• D) Flotation costs are higher for common stocks than for preferred stocks and bonds due to the higher level of risk associated with owning common stock.