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.

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Definitions:

Personal Liability

The legal obligation of an individual to fulfill or settle a debt or legal judgement from their own assets.

Informational Return

A tax document that entities use to report certain types of payments made to the IRS, like income from self-employment or dividends.

Internal Revenue Service

The U.S. federal agency responsible for administering and enforcing the tax laws and collecting taxes.

Corporate Officer

Executives who are appointed by a corporation's board of directors to manage the corporation's affairs.